European markets live updates: BoE decision, consumer confidence

Markets were mixed as they digested the Bank of England’s 50-basis-point rate rise.

Short-dated U.K. government bond yields were choppy, initially falling, then moving higher, and trading roughly flat one hour after the announcement. Yields on 10-year gilts were 5 basis points lower. Yields move inversely to prices.

The initial movements took the U.K.’s yield curve inversion — when short-term yields are higher than long-term yields — to its deepest level on available data since 2010, according to Reuters.

Neil Shearing, group chief economist at Capital Economics, said higher rates now could lead markets to price in rates starting to come down in 2024 or 2025, which would move the 2-year curve.

“The bond market’s initial reaction may reflect a belief that the BoE’s more aggressive action could help to contain longer-term inflationary pressures,” said Erik Norland, senior economist at CME Group.

Sterling was flat against both the dollar and euro.

“The MPC has demonstrated its determination to get a grip on domestically-generated inflation by hiking Bank Rate by 50bp and by choosing to omit any language designed to assure investors that the peak might be near,” said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, in a note.

“We still retain faith in the wide range of leading indicators which suggest that labour market slack will emerge and consumer price and wage rises will slow over the coming months. As a result, we still disagree with markets’ decision to price-in a 6.00% peak for Bank Rate,” he said, adding that he expects another 50 basis points worth of hikes spread across August and September.

— Jenni Reid

Thomas Jordan, chairman of the governing board of the Swiss National Bank, speaks to CNBC’s Joumanna Bercetche about the decision to hike by 25 basis points.

CNBC’s Joumanna Bercetche reports from the Bank of England ahead of its interest rate decision.

Shares of British grocery delivery firm Ocado Group popped 20% in morning trade after a report in The Times newspaper said its strong performance came amid “speculation of bid interest from more than one American suitor.”

The firm has suffered a steep decline in value since early 2021, as its coronavirus pandemic rally reversed.

A spokesperson declined to comment when contacted by CNBC.

The Swiss National Bank hiked interest rates by 25 basis points Thursday, taking the key rate to 1.75%. The move was forecast in a Reuters poll of economists.

Switzerland has not suffered the same level of inflation as many of its European neighbors, but it remains above the central bank’s 0-2% target, coming in at an annual 2.2% in May.

— Jenni Reid

European stocks fell in early Thursday trade, with the Stoxx 600 index down 1.27% at 8:38 a.m. London time.

All sectors declined, with autos shedding 2.1% and banks falling 2.6%.

France’s CAC 40 and Germany’s DAX were down 1.2% and 1.08%, respectively. The U.K.’s FTSE 100 fell 1.2% ahead of a key monetary policy decision in which markets are raising bets on a potential 50 basis point hike.

Traders are keenly awaiting the Bank of England’s latest monetary policy announcement, due at midday BST, in which at least a 25 basis point hike is all but guaranteed.

Figures for May published Wednesday showed the stickiness of inflation in the economy, with headline CPI holding steady on the previous month at 8.7% and core inflation accelerating to 7.1% from 6.8%.

U.K. government bonds sold off following the announcement, and the pound weakened.

Stephen Gallo, global FX strategist at BMO Capital Markets, said in a note that a 25 basis point hike Thursday would probably result in a weaker pound “as markets remove interest rate hikes from the curve” — resulting in faster credit growth due to higher borrowing and a widening trade deficit due to increased import costs.

“The second option is to move faster and more aggressively with tightening, by shifting to a series of 50 or even 75bps increments. With core inflation above 7.0% and the policy rate less than 5.0%, the Bank is arguably not restrictive enough,” he said.

Gallo also described the U.K. as already in a “slow moving fiscal crisis” after data Wednesday showed public sector net debt in May exceeded 100% of GDP for the first time since 1961.

— Jenni Reid

U.S. stocks have been red-hot, with the S&P 500 hitting its highest level in over a year.

But Steven Glass, managing director and analyst at Pella Funds Management, says U.S. markets have “run too fast, too quickly.”

Investors can look at cheaper stocks instead, according to Glass. Of the four stocks he named, two are “very cheap,” he said.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Shares of a Wall Street bank are forecast to more than double over the next 12 months, according to Jefferies.

Jefferies’ analysts suggest that large-scale share buybacks of about $4.7 billion over the next three years could help push up the global lender’s stock price.

They expect the bank to generate around $24 billion of profit over the course of 2023 to 2025.

CNBC Pro subscribers can read more here.

— Ganesh Rao

European markets are heading for a lower open Thursday.

The U.K.’s FTSE 100 index is expected to open 45 points lower at 7,512, Germany’s DAX 80 points lower at 15,845, France’s CAC 37 points lower at 7,512 and Italy’s FTSE MIB 132 points lower at 27,600, according to data from IG.

Investors in the U.K. are focused on the Bank of England’s next monetary policy announcement. The central bank is expected to increase rates as inflation remains stubbornly high.

Other data releases of note today include preliminary consumer confidence numbers for the EU in June.

— Holly Ellyatt