European Central Bank and Bank of England both keep rates on hold By Barbara Kollmeyer, MarketWatch MADRID (MarketWatch) — European stock markets posted sharp losses in volatile markets Thursday as losses for mining stocks and financials in London combined with economic-growth and sovereign-debt worries to overshadow well-received results reported by ING Groep NL and AXA SA. Extending earlier losses, the Stoxx Europe 600 index XX:SXXP -2.12% fell 1.4% to 248.38. The index fell around 2% on Wednesday, the biggest one-day percentage decline since March 15 and the fourth straight loss. U.S. stocks futures pointed to opening losses following Wednesday’s positive close — the first in nine sessions. Weekly jobless-claims figures and retailers’ sales data for July colored the action before Wall Street’s opening bell. Read full story on stock futures down ahead of GM, jobs data “Yesterday’s bloodbath on European bourses felt like something out of a really bad zombie film,” said Chris Purdy, sales trader at Spreadex Ltd., in emailed comments. “Although U.S. markets eked out gains at the end, it is worth noting that the Dow traded in a 200-point range in a sea-sickening storm of volatility. Purdy said any gains Thursday — the market was up earlier in Europe — are likely just a “dead cat bounce” given a weak macroeconomic backdrop as well as corporate earnings that “remain largely unsympathetic to investors.” As Europe markets seesawed, concerns about sovereign debt, lately focused on rising borrowing costs for Spain and Italy, remained at the foreground. Italian stocks were once again falling sharply, with the FTSEMIB index XX:FTSEMIB -2.34% down 2.5%, paced by a 6% drop for Fiat Industrial SA IT:F -5.77% , as markets continued to fret a slowdown in growth, led by the U.S. Also, Prime Minister Silvio Berlusconi failed to calm markets with a speech on Wednesday. Meanwhile, in an interview with Italian news agency ANSA, Fiat Chief Executive Sergio Marchionne called for “stronger leadership” in Italy. Spain’s IBEX 35 index XX:IBEX -2.07% gave up earlier gains to fall 0.5%. The Spanish government sold 3.3 billion euros ($4.71 billion) of three-and-four-year bonds in a closely watched auction, but not everyone was impres+sed. “Today we are reacting to sovereign issues. Even though Spanish auctions got covered, yields are higher,” said Stephen Pope, managing partner at Spotlight Ideas, in emailed comments. “Spain has done a lot on the fiscal side but cannot overcome the high cost of capital. “The European Central Bank is now facing a major dilemma: they are going to have to stop rate hikes and start buying bonds. Euro-zone quantitative easing is on its way.” The Bank of England’s and the European Central Bank both left key interest rates unchanged after policy meetings concluded on Thursday. Markets will now focus on a press conference with ECB President Jean-Claude Trichet starting at 2:30 p.m. central European time for any comments regarding slowing growth and financial market turmoil. Read Little guidance expected from ECB’s Trichet Miners, oil stocks weigh; U.K. banks off Heavyweight mining stocks proved a drag on the Stoxx 600. Shares of Rio Tinto PLC RIO -6.63% UK:RIO -5.12% , which sank 5.2% after posting a 30% rise in first-half profit, but warning of risks to its outlook for 2011 and into 2012, “related to the pace of credit tightening in developing countries and the threat of financial crises arising from sovereign debt problems in Europe and the U.S. which could destabilize commodity markets.”

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