European stock markets moved mostly lower at the open on Thursday, as investors awaited the latest policy decisions from the European Central Bank and the Bank of England. The ECB has left monetary policy unchanged over past meetings, but after a weak inflation reading for October, investors raised expectations for a rate cut either at Thursday’s meeting or in December.
The Stoxx Europe 600 index fell 0.1% to 322.92, after gaining 0.4% on Wednesday.
Among country-specific indexes, Germany’s DAX 30 index added 0.03%, France’s CAC 40 index retreated 0.14%, while the U.K.’s FTSE 100 index slipped 0.23%.
The ECB will leave its main refinancing rate at a record-low 0.5% today, according to economists. Bank of America Corp., Royal Bank of Scotland Group Plc and UBS AG predict the central bank will reduce borrowing costs by 25 basis points.
ECB staff forecasts for growth and inflation are scheduled for publication in December. Under Draghi’s predecessor, Jean-Claude Trichet, those factors traditionally provided the justification for a shift in interest rates.
Euro-area GDP shrank 0.3% this year, improving from a 0.7% decline in 2012, according to the median of analyst estimates. Economists predict the region will grow 1% in 2014.
In UK the strong PMI reading suggests growth may pick up further in the last quarter and thus increases the likelihood that the BoE will raise real GDP forecast from 1.3% in 2013 after having assumed in August that growth would ease back modestly in Q4.
Expectations for further strengthening in 2014 have also increased. In addition to the booming Services sector, employment growth is picking up, putting upward pressure on wages and costs and therefore inflation which has the potential to be a key driver for GBP strength going forwards.
Shares of Commerzbank AG rallied 8.3% after the German bank reported a stronger-than-forecast third-quarter profit.
HeidelbergCement AG lost 4.1% after the company said currency effects are weighing on operating income.
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