European markets were lower Tuesday as investors assessed a surprise announcement from the Bank of Japan and the interest rate outlook for 2023.
The pan-European Stoxx 600 closed 0.4% lower provisionally after a choppy afternoon, with most sectors and major bourses trading in negative territory. Autos led losses with a 1.5% fall, while a few sectors gained, including banks, which rose 1.7%.
The Stoxx index had traded lower earlier in the session after Japan's central bank caught markets off guard by widening its cap on 10-year Japanese government bond yields.
European markets
The BoJ — an outlier compared with most major central banks — also left its benchmark interest rate unchanged at -0.1% Tuesday and vowed to significantly increase the rate of its 10-year government bond purchases, retaining its ultra-loose monetary policy stance.
It comes after the European Central Bank last week hiked its key interest rate from 1.5% to 2% and said it would look to shrink its balance sheet by around 15 billion euros ($15.9 billion) every month from March 2023 to the end of the second quarter. The ECB said rate hikes would need to continue "significantly at a steady pace."
The Bank of England and the Swiss National Bank struck similar tones and also opted for 50 basis point hikes, matching the U.S. Federal Reserve's decision last Wednesday.
Markets in the Asia-Pacific fell as the Bank of Japan modified its yield curve control tolerance range while holding its ultra-low benchmark interest rates steady, with the Nikkei 225 leading losses.
U.S stocks were mixed in morning trade, with the Dow Jones Industrial Average flat and the S&P 500 and Nasdaq Composite moving down 0.16% and 0.39%, respectively.