European Shares Tumble on Oil Surge, Hawkish ECB Stance; Stoxx 600 Falls 1.3%

European shares posted their biggest single-day loss in more than two weeks on Thursday, as a surge in crude oil above $100 a barrel and hawkish signals from the European Central Bank reignited inflation fears and weighed on investor sentiment.

The pan-European Stoxx 600 index fell 1.3% to 638.5 points, according to Reuters. Germany's DAX tumbled 1.56%, France's CAC 40 shed 1.64%, and the UK's FTSE 100 ended down 0.73%, as reported by Nasdaq.

Brent crude futures hit $100 a barrel for the first time since May, and later rose to $101.22, gaining more than 7%, after Yemen’s Houthis said they had attacked two Saudi oil tankers in the Red Sea, adding to concerns over global supply disruptions. West Texas Intermediate crude rose above $90, according to Reuters and Channel News Asia.

The rise in oil prices lifted European energy shares 1.54%, with TotalEnergies gaining 2.5% after reporting its strongest quarterly earnings in nearly three years, boosted by higher oil prices and robust refining margins, Reuters reported.

**ECB Holds Rates, Signals September Hike**

The ECB left its key interest rates unchanged on Thursday, as expected, after raising them for the first time in nearly three years at its previous meeting. The deposit rate stands at 2.25%, the refinancing rate at 2.4%, and the marginal lending rate at 2.65%, Nasdaq reported.

However, markets interpreted President Christine Lagarde’s comments as leaning toward a rate hike in September. According to Reuters, Lagarde noted that a move at the current meeting was discussed and that the full extent of the second oil shock underway has yet to be felt. Channel News Asia reported that rates traders are pricing in a 70% chance the ECB hikes again in September, anticipating around 75 basis points of tightening over the next year.

“The ECB is clearly leaning hawkish. For all the data it will see and the analysis it will conduct between now and September, the decision will, to a large extent, come down to the trajectory of oil prices and conditions in the Middle East,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, as quoted by Reuters.

**Tech and Food Stocks Drag Markets Lower**

Technology stocks were among the hardest hit, with the sector slipping 2.9%. STMicroelectronics tumbled 17.7% after the chipmaker forecast third-quarter revenue slightly below market expectations, Reuters reported. Nasdaq noted the stock fell 16%. BE Semiconductor dropped 7.3% after its second-quarter results.

Infineon plunged more than 6% in Germany, while SAP, Deutsche Telekom, and Deutsche Bank lost 4% to 4.1%, according to Nasdaq.

The food and beverage index fell 4.1%, weighed down by Nestle, whose shares tumbled nearly 8% — their biggest loss since 1989. The company raised its full-year organic sales outlook but said it would sell part of its water and premium beverages business to Platinum Equity, Reuters reported.

“You’re seeing more questions being asked about where’s the future revenue going to come from... twelve months ago the rage was about hyperscalers and the same questions were asked. Now, the semis came into the fall,” said Rushabh Amin, multi-asset portfolio manager at Allspring Global Investments, as quoted by Reuters. “Even if you have decent earnings, there is a kind of drag coming from a slight unwind in sentiment and in positioning.”

**Big Tech Cash Burn Adds to Pressure**

Channel News Asia reported that Alphabet and Tesla results after the bell on Wednesday confirmed that both companies are burning cash. Alphabet's free cash flow in Q1 turned negative for the first time since the company floated more than 20 years ago, and Tesla's FCF turned negative for the first time in two years. Big Tech is now relying on debt and share sales to bankroll AI spending, which is set to top $700 billion this year as cash flows fall short, the report said.

In U.S. markets, the S&P 500 fell 1.2% and the Nasdaq dropped 2.2%, with Tesla down 15%, Alphabet down 7%, and Amazon down 5%, Channel News Asia reported.

**Other Notable Movers**

Budget airline easyJet rose 2.7% despite reporting a 70% drop in third-quarter profit, as it flagged strong summer demand, according to Reuters and Nasdaq. Finnish forestry group Stora Enso reported a quarterly operating profit below market expectations, sending its shares down about 8.5%, Reuters said.

In the UK, Segro climbed 6.5% and 3i Group jumped 4.8%, while BP, Anglo American, BAE Systems, and Shell gained 1.5% to 3%. Centrica tumbled more than 10% after saying it would cut 1,300 jobs following a 18% fall in half-year profit, Nasdaq reported.

Daimler Truck Holding rallied nearly 4% after raising its full-year revenue and profit outlook, while Thales surged more than 5% and Dassault Systemes gained 3.7% after solid Q2 results, according to Nasdaq.

European natural gas prices have exploded 60% in the last month, hitting their highest level since just after the U.S.-Iran war started, Channel News Asia reported.