European stocks close lower after Wall Street sell-off; BOE warns of recession risks; Airbus jumps 6%

LONDON — European markets closed lower Thursday, despite being higher for much of the session, as traders weighed warnings from the Bank of England and a heavy sell-off in the U.S

The pan-European Stoxx 600 index closed down by 0.8%, with travel stocks losing over 3.6% and insurance stocks shedding 2.8%

On Wall Street, stocks fell sharply as European markets closed, erasing the gains seen in the previous session. The Fed on Wednesday raised its benchmark interest rate by half a percentage point, its biggest hike in two decades, as it looks to rein in inflation running at a 40-year high. The central bank will also begin reducing its balance sheet in June

However, Chairman Jerome Powell ruled out more aggressive hikes in future policy meetings, prompting a relief rally on Wall Street as traders began backing the Fed to contain inflation without causing a recession

Focus in Europe on Thursday was on the Bank of England, which raised interest rates to their highest level in 13 years in a bid to tackle soaring inflation

The Bank’s Monetary Policy Committee approved a 25-basis point increase by a majority of 6-3, taking the base interest rate up to 1%. The Bank said the members in the minority preferred to increase interest rates by 0.5 percentage points to 1.25%

In its updated forecasts, the Bank highlighted the looming recession risk for the world’s fifth-largest economy. The BOE said it now expects gross domestic product to contract in the final three months of the year, partly reflecting the projected large hike in household energy bills in October

The war in Ukraine also remains on investors’ radar. Russian forces have reportedly renewed their assault on the Azovstal steelworks complex, a last stronghold for Ukrainian fighters in the southern port city of Mariupol Meanwhile, the EU has proposed a gradual ban on Russian oil in its sixth round of sanctions against Moscow since the unprovoked invasion of Ukraine

Corporate earnings continue to guide individual share price action in Europe. Shell, BMW, Leonardo, UniCredit, Intesa Sanpaolo, Banco BPM, Societe Generale, Credit Agricole, AXA, Stellantis, Airbus and Air France KLM were among those reporting before the bell on Thursday

Airbus shares jumped more than 6% after a strong first-quarter report, while S4 Capital surged more than 10% after the British advertising company announced that its delayed full-year results will be released on Friday

At the bottom of the European blue chip index, Austrian electricity company Verbund fell 12%