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European shares inch lower ahead of ECB meet By Reuters


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© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 13, 2023. REUTERS/Staff/ FILE PHOTO

By Shreyashi Sanyal

(Reuters) -European shares slipped on Thursday amid rising fears of an increase in interest rates by the European Central Bank (ECB) later in the day just after the U.S. Federal Reserve signalled more hikes.

The continent-wide index dipped 0.2% at 0831 GMT.

The ECB is seen increasing the deposit rate by 25 basis points to 3.5%, the highest level in 22 years, while leaving the door open to more hikes to stamp out the sticky inflation even as the eurozone economy lags.

Inflation in the euro zone is at 6.1%, more than three times the ECB’s 2% target.

The Fed left interest rates unchanged on Wednesday but signalled at least half of a percentage point increase in borrowing costs by the end of this year.

“We expect no policy surprises, saving the limelight for the ECB’s new economic projections (on Thursday),” said Philip Marey, senior strategist at Rabobank.

“Keeping the medium-term inflation forecast a smidgen above 2% would signal that markets are pricing rate cuts too early. Conversely, if the inflation outlook is lowered to target, that would undermine the hawkish narrative of a longer pause.”

The euro STOXX volatility index, an equivalent of Wall Street’s so-called fear gauge , fell briefly to its lowest since the outbreak of the COVID pandemic in 2020.

Markets are eying more economic data and updates from major central banks to help the STOXX 600 break out of the 1% trading range it remains stuck for nearly two weeks.

The rate-sensitive technology sector index shed 0.2%, while the basic resources shares led falls with a 1.1% decline.

Miners tracked a fall in base metals prices in London on poor economic data from top metals consumer China.

European retailers gained 0.8%, with H&M jumping 5.2% after the Swedish clothes group said June had started well.

British technology company Halma slipped 4.5% to the bottom of the STOXX 600 as its annual margins outlook disappointed.

SoftwareOne shares surged 19.3% after Bain Capital Private Equity made an offer for the Swiss software management company, valuing it at 2.9 billion Swiss francs ($3.21 billion).

Informa Plc advanced by 3.4% after raising its annual profit and revenue forecast.

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