Europe stocks close October with biggest monthly loss for a year; UK housebuilders plunge after budget

LONDON — European markets closed lower on Thursday, ending October with its steepest loss for a year as investors weighed earnings, inflation and a landmark U.K. budget.

The pan-European Stoxx 600 closed the session 1.2% lower with all sectors and major bourses in the red. It takes monthly losses to 3.4%, according to LSEG data, the worst performance for the regional benchmark since October 2023.

Preliminary data published Thursday showed that inflation in the euro zone rose to 2% in October, higher than the 1.9% expected by analysts polled by Reuters and ahead of September’s 1.7% reading.

The figures will inform the European Central Bank’s decision on the path of interest rate cuts, with economists saying there is now little chance of a jumbo 50 basis point rate cut at its December meeting rather than the expected 25 basis point cut.

The release comes after economic data published Wednesday showed that the euro zone economy grew 0.4% in the third quarter of 2024, above the 0.2% rise expected by economists polled by Reuters.

U.K. housebuilders broadly retreated as U.K. government bond yields soared through the afternoon, with traders appearing to grow increasingly wary of the huge package of tax rises and borrowing announced in Wednesday’s budget. Some economists argued the package will be mildly inflationary and reduce the pace of Bank of England rate cuts.

Charlie Campbell, equity researcher at Stifel, told CNBC housebuilders were highly sensitive to interest rate swaps and would be disappointed by the budget, which failed to provide much clarity for the sector.

However, he added that the outlook was likely to brighten amid the remainder of third-quarter results, as interest rates do continue to gradually reduce, and as the Labour government provides detail on sector-supportive policies.

Shares in Societe Generale meanwhile closed 11.3% higher after the bank posted a 10.5% year-on-year revenue jump in the third quarter and announced leadership changes, including the appointment of a new chief financial officer.

Shell, Stellantis, Maersk, AB Inbev, and Carlsberg also reported.

U.S. stocks fell for a second day, weighed down by weaker-than-expected earnings reports from key technology companies.

Investors also considered the latest U.S. economic data, with the personal consumption expenditure price index coming in at 2.1% on an annual basis in September, which was in line with expectations. The PCE reading is the Fed’s preferred inflation gauge.

Elsewhere, Asia-Pacific markets slipped as investors reacted to the Bank of Japan’s rate hold, as well as key business activity figures from China.