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European Stocks Sink Lower Thursday as Switzerland Ends Era of Negative Rates

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Last updated: 09/22/2022 12:47:08

12:47 PM EDT, 09/22/2022 (MT Newswires) -- European shares were deep in the red Thursday as the central banks of Switzerland and the UK raised interest rates to help combat sky-high inflation and a looming global recession.

Stoxx Europe 600 was down by 1.79%, London's FTSE 100 by 1.12%, the Swiss Market Index fell 1.27%, France's CAC lost 1.71% and Germany's DAX was off 1.65%.

While it was expected, the Swiss National Bank took a big step with its 75-basis-point rate increase as it ended the country's run as having the world's lowest interest rate. It also exited the negative territory for the first time since 2015 with a 0.5% rate.

In the UK, the Bank of England hiked its key interest rate to 2.25%, its highest since the 2008 financial crisis. The 50-bp decision divided policymakers, with three of the nine-person committee favoring a higher 75-bp increase.

On top of the not-so-aggressive move, the BoE lowered its peak inflation forecast for 2022 despite expecting a GDP contraction in Q3. In August, it expected inflation to peak at 13% in October, which it now sees at 11%, attributed to UK Prime Minister Liz Truss' recently approved energy price guarantee.

Meanwhile, the eurozone flash consumer confidence indicator fell to a record low and deeper than estimated at -28.8.

In corporate news, Airbus (AIR.PA) secured a $4.85 billion aircraft order from Xiamen Airlines, which, before the deal, operated an all-Boeing fleet. The stock was down 1.10%.

Meanwhile, Credit Suisse (CSGN.SW) fell 5.49% on the Swiss bourse as it is reportedly mulling options to support its investment banking division. These include a capital increase, splitting the business into three, and even a full exit of the US market.

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