Europe’s STOXX 600 Dips as Banks Lead the Decline Amid Societe Generale Target Cuts and BoE Rate Decision

Europe's STOXX 600 fell over 1% on Thursday, led by a decline in banking stocks. Societe Generale's key target cut for its French retail division and the Bank of England's interest rate reduction weighed on the market. Other notable moves included Rolls-Royce's surge and Worldline's record low plummet.

Europe's STOXX 600 index dropped over 1% on Thursday, with banks leading the sell-off following Societe Generale's adjustment of a key target for its French retail division and the Bank of England's interest rate cut.

The pan-European STOXX 600 wrapped up the session 1.2% lower after hitting a two-week high earlier. Banking stocks saw a robust decline of 4.5%, marking their largest single-day drop since the March 2023 turmoil caused by the Credit Suisse collapse and instability in U.S. regional banks.

Societe Generale's shares plummeted nearly 9% after the lender slashed its French retail net interest income guidance, overshadowing its quarterly earnings exceeding forecasts. Italy's bank-dominated benchmark index dipped by 2.7%, while Spain's benchmark fell 1.9%.

Focus shifted to monetary policy as the Bank of England reduced interest rates from a 16-year peak, following a tight vote split among policymakers over easing inflation pressures. J.P. Morgan's global market strategist, Matthew Landon, observed the move mirrored the hawkish rate cut by the European Central Bank in June.

Britain's FTSE 100 fell 1%, with HSBC plunging by 6.5%. Lower rates could affect interest margins, a crucial income source for banks. Fed Chair Jerome Powell suggested possible rate cuts by September if the U.S. economy aligns with expectations.

Germany's benchmark index decreased by 2.3%, with BMW down 3.1% due to disappointing automotive sector profit margins in Q2. Euro zone manufacturing activity contracted in July, continuing a trend with Germany's sector falling further.

On a brighter note, Rolls-Royce surged 7% after reinstating dividends and raising its 2024 profit and cash flow forecasts, while the French payment technology firm Worldline dropped 15.3% to an all-time low, amid declining consumption trends and recovery uncertainties.

(With inputs from agencies.)