European Stocks Falter Amid ECB Rate Cuts and Trade War Fears

European stocks closed marginally lower following ECB's interest rate cut by 25 basis points, leaving room for more easing amidst economic and political challenges. Despite some bank shares rising, concerns over a potential U.S. trade war and inflation remain. Luxury stocks showed gains, but basic resources declined.

European stocks ended Thursday lower as the European Central Bank implemented a widely anticipated 25 basis points interest rate cut, signaling potential for further monetary easing to bolster a sluggish economy facing mounting political risks. The pan-European STOXX 600 index concluded a volatile day with a 0.1% decrease, though eurozone bank shares climbed 0.3% due to their rate sensitivity.

The interest rate reduction is the ECB's fourth this year, escalating discussions on whether these cuts are sufficient to stimulate an economy struggling against possible trade wars with the U.S. Nonetheless, some investors zeroed in on ECB President Christine Lagarde's remarks that the inflation battle continues, nudging German bond yields upward.

Market forecasts now anticipate 120 basis points worth of rate cuts by 2025, according to LSEG data. "The ECB maintains its course. Inflation is easing, yet leading indicators show slower wage growth ahead and insignificant economic growth," stated Mathieu Savary, a strategist from BCA Research. The STOXX index has risen over 8% this year on expectations of reduced borrowing costs, contrasting with the U.S. S&P 500's over 27% increase.

(With inputs from agencies.)