By Nikhil Sharma
(Reuters) – European shares reversed early gains on Thursday, hurt by losses in banks, while investors turned to a series of interest rate decisions by major central banks across the continent.
The pan-European STOXX 600 was down 0.5% as of 0941 GMT, on course to snap its four-session winning streak.
The Bank of England is likely to keep interest rates on hold later in the day, as it waits to assess the impact of U.S. President Donald Trump’s trade tariffs and the British government’s impending tax hike for employers.
Sweden’s central bank kept its policy rate unchanged at 2.25% as expected on Thursday, while the Swiss National Bank cut its policy interest rate by 25 basis points to 0.25% from 0.5%.
The U.S. Federal Reserve stood pat on its policy rates on Wednesday, as it lowered its economic growth outlook for this year and raised inflation projections due to higher uncertainty from Trump’s trade tariffs.
On Thursday, the index of European banks dropped about 2% from its record high levels.
Commerzbank fell 6.2% to be on track for its worst day since September 2023. CEO Bettina Orlopp said the lender hasn’t had talks with UniCredit since it last week got approval from the European Central Bank for taking a stake of just under 30%.
European aerospace and defence index fell 1.5% but was still trading near record levels on higher military spending plans by the region.
“Europe has had a fantastic run to start the year, defying all expectations…. you’re just seeing a bit of fatigue creeping in,” said Chris Beauchamp, chief market analyst at IG Group.
“The best Europe can hope for the moment is that they hold their ground in the short term, if they might struggle to move higher over the next couple of weeks or so.”
Swiss watchmakers Richemont and Swatch Group fell 2.7% and 3.6%, respectively, after data showed Swiss watch exports fell in February. The region-wide luxury index fell 0.4%.
The real estate sub-index rose 0.5% as euro zone government bond yields fell.
Germany’s 10-year government bond yields were down about 3 basis points at 2.769%.
Shares of Sodexo dropped 16.7% to a two-year low after the French food caterer lowered its 2025 outlook.
Lanxess fell 5.3% after the German chemicals maker said it expected full-year 2025 earnings to be impacted by slow economic growth and a high likelihood of politically triggered economic turbulence.
(Reporting by Nikhil Sharma; Editing by Sherry Jacob-Phillips and Mrigank Dhaniwala)
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