Europe close: Shares flat as BoE, PacWest weigh on sentiment

European shares closed flat on Thursday as the Bank of England hiked interest rates to their highest level since 2008 and investors fretted over another share price slump at US bank PacWest.

The pan-regional STOXX 600 index closed on the flatline after the BoE raised UK interest rates by a quarter of a percentage point to 4.5%, as it continues to battle high inflation. It was the 12th increase in borrowing costs in a row and the highest level since October 2008, when banks caused the global financial crisis.

“An unsettled feeling has descended on indices after the Bank of England failed to rule out further rate hikes and investors turn jittery again about deposit flight from the US regional banking sector," said Hargreaves Lansdown analyst Susannah Streeter.

"Investors are now zeroing in on troubles at PacWest, after the lender said deposits fell by almost 10% last week and was forced to pledge more assets to the Federal Reserve in return for increasing its borrowing capacity. With yet another regional bank taking emergency action in response to fleeing customers, worries about the fragility of the regional banking sector show little sign of abating."

In equity news, shares in aircraft engine maker Rolls-Royce fell as the company held annual guidance. The stock has been one of the star performers so far this year, posting gains of 60% after full year results and a hike in profit guidance.

Dutch bank ING gained after reporting better than expected first-quarter profit, helped by rising interest rates and modest risk costs.

German conglomerate Thyssenkrupp fell as it posted a second-quarter net loss, but raised guidance for free cash flow.

UK broadcaster ITV was under the cosh after the broadcaster reported a drop in first-quarter total advertising revenue and said the outlook was "challenging" given the current macroeconomic backdrop.

Shares in Bayer fell as the German chemicals giant heavy fall in first-quarter profits, pulled down by falling sales of crucial weedkillers and drugs.

Reporting by Frank Prenesti for Sharecast.com