European stocks extended losses on Wednesday morning, slumping to a three-month low as investors express uncertainty over the Bank of England’s (BoE) interest rate policy decision due later in the day.
The pan-European STOXX 600 slumped by 1% in what was its fourth straight daily decline, while the UK’s FTSE 100 Index fell by 0.9%. Although it was London stocks that were initially affected by speculation surrounding the BoE’s upcoming decision, this anxiety spread to other European countries expressing concern over their own central banks’ actions going forward.
With UK inflation remaining stubbornly high, the BoE is expected to raise interest rates in June for the thirteenth time in a row. Markets are betting that the rate hike will be between 25 and 50 basis points.
Banking stocks reacted negatively to the latest interest rate speculation, falling 1.8% to put them on course to their worst session in almost a month. The European auto sector followed, slipping 1.5%, while technology stocks declined by 1.1%.
The speculation comes after the Swiss National Bank raised its interest rate by 25 basis points on Thursday in an effort to limit sticky inflation.