European stocks lacked momentum on Tuesday as the boost from China’s economic reopening faded and investors became concerned about the risk of further interest rate hikes. The pan-European STOXX 600 index experienced a 0.2% decline at 0800 GMT, following a 0.7% increase on Monday.
China’s economy surpassed expectations by growing 0.4% in the second quarter compared to the previous year. This indicated a recovery from the COVID-19 pandemic’s impact, but also emphasized the challenges China faces in balancing growth with its zero-COVID policy.
Investors are eagerly awaiting the European Central Bank’s policy meeting on Thursday, which is expected to result in the first interest rate hike in 11 years. However, the exact magnitude of the increase remains uncertain.
The ECB finds itself in a difficult position, according to Michael Hewson, chief market analyst at CMC Markets. It needs to raise rates to combat inflation, but must also be cautious about impeding economic growth.
In terms of individual stock news, French luxury goods group LVMH experienced a 1.2% rise following strong quarterly results. On the other hand, German industrial conglomerate Siemens saw a 1.1% decline after announcing plans to slow down hiring in the second half of the year. British energy company BP, however, witnessed a 0.7% increase after announcing an expansion of its share buyback program by $2.5 billion.
