Europe: Pre-ECB jitters knock 1% off stocks

[BENGALURU] European stocks marked their biggest decline in three weeks on Wednesday, a day before a European Central Bank meeting that will see policymakers debate a cut in its pandemic-era stimulus programme.

The Europe-focused Stoxx 600 index fell 1.1 per cent, with automobile stocks leading losses with a 2.2 per cent drop.

Finnish tyre maker Nokian Tyres was the worst performer in the sector, down 4.4 per cent amid investor disappointment with the firm's new margin targets.

Economy-sensitive financial services, oil and gas, and banking stocks fell around 1.3 per cent, as investors feared any changes to the ECB's large stimulus programme, given a recent spike in inflation.

"It's only a month ago that stocks were at all-time highs, and with an ECB meeting tomorrow, people will be unwilling to buy because it can be a bit of a risky trade," said David Madden, market analyst at Equiti Capital in London.

"It's more of what happened in the US last night and just a bit of position squaring ahead of ECB."

The central bank is expected to announce a reduction in bond buying on Thursday, with analysts polled by Reuters forecasting purchases under the Pandemic Emergency Purchase Programme (PEPP) falling possibly as low as 60 billion euros (S$95.44 billion) a month from the current 80 billion euros.

Austria's central bank chief Robert Holzmann, considered a hawkish member of the ECB, also said the central bank could tighten policy sooner than many expect as inflationary pressures could prove to be persistent.

After hitting a record high in mid-August, the Stoxx 600 has hovered below those levels as worries over central bank policies and signs of slowing global growth kept investors on edge.

Spanish turbine maker Siemens Gamesa fell 8.6 per cent, and was the worst performer on the Stoxx 600 after JPMorgan downgraded the stock to a "neutral" rating. Danish peer Vestas also fell 4.5 per cent.

Swedish investment company EQT fell 3.4 per cent after a share-placing deal, while Stellantis dropped 2.9 per cent as Dongfeng Motor Hong Kong said it had sold shares in the carmaker for about 600 million euros (S$955.6 million).

French drugmaker Sanofi slipped 2.5 per cent after it agreed to buy US biopharmaceutical company Kadmon Holdings Inc in a US$1.9 billion deal.

British industrial technology company Smiths Group rose 2.6 per cent after it agreed to sell its medical unit to US-based ICU Medical Inc for US$2.4 billion.

REUTERS