EU stock markets retreat ahead of central bank rate hike

European stock markets retreated as investors braced for a week-long central bank rate hike and key news from the banking sector.

The pan-European Stoxx 600 index retreated 1.5% in London, with losses in healthcare across all sectors up 0.2%. The sector fell 4.7%, despite assurances from policymakers that the system is solid after recent turmoil.

Citigroup downgraded Europe’s banking sector to neutral this week, citing the effects of prolonged monetary policy tightening.

Deutsche Bank experienced an 11.8% plunge, following a 3.3% decrease the day before. The bank had an upsurge in its credit default swaps, a type of security for bondholders.

Financial services stocks retreated 1.8%, mining stocks declined 2.6%, and oil and gas stocks declined 3.4%.

The Bank of England raised its key rate by 25 basis points to 4.24% on Thursday, which markets appreciated after U.K. inflation showed a surprising gap.

The Swiss central bank increased its interest rate by 0.5%.

U.S. stocks ended the session higher after the Fed signaled it would hike another 0.25% point this year. However, European stocks were smaller during the session.

Monthly consumer confidence statistics from GfK showed that U.K. households became more optimistic in February, an improvement it notes, including the future financial situation, the ability to finance major purchases, and greater economic activity.

Emerging market stocks

Emerging-market stocks retreated as U.S.-China tensions escalated, erasing the gains that had been accrued in the past three days. Anxiety about the banking industry also lingered. This marks the highest performance of the main index in the two months since.

Shares in China and Hong Kong retreated 0.7% each after US geopolitical instability weighed on investor sentiment.

But concerns about the state of the U.S. banking sector continued even after the U.S. Treasury Secretary assured that appropriate steps would be taken to preserve the deposits of Americans amid the instability in the sector caused by the collapse of two regional U.S. banks.

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