Europe’s STOXX 600 Stays Steady as Attention Turns to ECB

By Pranav Kashyap and Shubham Batra

European shares ended the day with little change as gains in technology stocks were counterbalanced by declines in the real estate sector. Investors are now looking ahead to the European Central Bank’s rate decision set for Thursday.

The pan-European index showed no significant movement during the trading session. German stocks outperformed their European counterparts, with Commerzbank witnessing a 16% surge after Italy’s UniCredit acquired a 9% stake in the German bank, including 4.5% purchased from the German government for approximately 702 million euros.

A notable 3.8% increase in shares of ASML Holding helped bolster the technology sector, although a 0.8% drop in the real estate sector limited overall gains. The basic resources sector gained 0.4% as prices rose, supported by a softer U.S. dollar.

In the UK, the benchmark index dipped by 0.2%, and the latest GDP data indicated no month-on-month change in the country’s economic output for July.

Investors remained attentive to U.S. consumer prices, which saw a slight increase in August. However, stubborn underlying inflation—driven by rising rents and service costs—may deter the Federal Reserve from implementing a half-point interest rate cut next week. Money markets are currently pricing in only a 15% chance of a 50 basis point cut on September 18, a decrease from a 30% probability before the inflation figures were released.

As the European Central Bank prepares to meet, attention is focused on an expected 25 basis point interest rate cut. Joe McConnell, a portfolio manager at J.P. Morgan Asset Management, stated, "Anything other than a 25 bp rate cut from the ECB tomorrow would be a huge surprise to us and the market," highlighting the importance of ECB President Christine Lagarde’s comments on inflation persistence and the future pace of rate cuts.

Global investors approached the markets cautiously following the first debate between U.S. presidential candidates Kamala Harris and Donald Trump, which transpired overnight. The debate, while lacking in specifics, shifted betting markets in favor of Harris.

In individual stock movements, Rentokil experienced a significant decline of 20% after the British pest control company reported a slowdown in North American revenue and announced job cuts. In contrast, Inditex, the owner of Zara, rose by 4.5%, leading the retail sector upward following a report of stronger sales for its initial autumn-winter collections.