European markets recovered from early lows on Thursday, but still ended the session notably lower, weighed down by warnings from the Federal Reserve and the Bank of England about the outlook for the economy.
Continued worries about the surge in coronavirus cases, including in France, the U.K. and the U.S, and fears about a no-deal Brexit hurt as well.
France reportedly recorded its recorded its second-highest single-day rise in the number of new coronavirus infections on Wednesday.
The pan European Stoxx 600 ended down 0.51%. The U.K.'s FTSE 100 slid 0.47%, Germany's DAX shed 0.36% and France's CAC 40 declined 0.69%, while Switzerland's SMI ended lower by 0.31%.
Among other markets in Europe, Austria, Czech Republic, Ireland, Netherlands, Portugal, Spain and Sweden ended weak.
Belgium, Norway, Finland and Russia ended flat with a somewhat negative bias.
Denmark, Greece, Iceland, Poland and Turkey closed higher.
The Fed left its policy rates unchanged yesterday and maintained its asset purchase programme, and the Bank of England today held its interest rates and kept current level of asset purchased unchanged.
Federal Reserve Chairman Jerome Powell's warning that the economic downturn due to the pandemic is "the most severe in our lifetime" and that more fiscal stimulus might be needed to sustain economic recovery weigh continued to weigh on sentiment. The Fed left its key rates unchanged as expected and said rates will be low through 2023.
BoE's nine-member Monetary Policy Committee unanimously voted to hold the interest rate at 0.10%, as widely expected. The bank had altogether reduced the rate by 65 basis points at two unscheduled meetings in March.
The bank retained the size of the asset purchase programme at GBP 745 billion, and said the existing stance on monetary policy remains appropriate and that it does not intend to tighten policy until there is clear evidence that significant progress is being made in achieving the 2% inflation target sustainably.
BoE reiterated it stands ready to take action if needed, suggesting possibility of more stimulus as well as negative interest rates.
Earlier in the day, the Bank of Japan held its policy unchanged, but sounded a bit upbeat with regards to its views about the outlook for the economy.
In the UK market, WPP, BHP Group, Taylor Wimpey, TUI, Standard Chartered, Associated British Foods, Royal Bank, HSBC Holdings, Barclays Group, Vodafone, IAG and Standard Life lost 1.7 to 3%.
Among the gainers in the FTSE index, Next surged up nearly 4.5% on increased earnings outlook. J Sainsbury also gained more than 4%. British Land Company, Segro, Ocado Group, Rentokil Initial and ITV gained 2 to 3%.
In Germany, Continental, Munich RE, RWE, Allianz, Deutsche Bank, Adidas and Infineon Technologies lost 1 to 1.6%, while Lufthansa and Fresenius moved up nearly 3% and 1.5%, respectively.
Grenke, which suffered sharp losses earlier this week, soared more than 30% today after the company denied fraud allegations by Viceroy Research and revealed that it is considering legal action against Viceroy.
In the French market, STMicroElectronics, Valeo, Publicis Groupe, Carrefour, Capgemini, Credit Agricole and LVMH lost 1 to 2.5%.
Among the gainers, ArcelorMittal moved up nearly 2.5%. Technip gained about 2.1% and Michelin advanced a little over 1%.
In other economic news, final data from Eurostat said Eurozone consumer prices declined in August, as initially estimated. Consumer prices fell 0.2% year-on-year in August, reversing a 0.4% rise in July. This was the first decline since May 2016. The rate came in line with the estimate released on September 1.
On a monthly basis, consumer prices decreased 0.4% as initially estimated in August. Core inflation that excludes volatile energy, food, alcohol and tobacco, eased to a record 0.4% from 1.2% in July. The core rate also matched preliminary estimate.
Another report from Eurostat showed Eurozone construction output growth eased sharply in July, increasing just 0.2% month-on-month, after seeing a 5.1% jump in June.
Production in building construction remained unchanged, while that of civil engineering rose 1.1%.
On a year-on-year basis, the construction output fell 3.8% in July, following a 4.8% decline in the prior month.
Data from the European Automobile Manufacturers Association, or ACEA, showed car registrations in Europe decrease 18.9% year-on-year in August, following a 5.7% drop in July.
Switzerland's exports rose for the third straight month in August and surpassed the CHF 18 billion mark for the first time since March, data from the Federal Customs Administration showed. Exports increased by a real 2.9% month-on-month in August, following a 2% rise in July, while imports declined 1.3% monthly in August, after a 0.5% rise in the previous month.
According to the Federation of the Swiss Watch Industry, watch exports declined 11.9% year-on-year in August.
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