(Bloomberg) -- European stocks dropped on Thursday following a slate of downbeat corporate earnings. Investors also focused on the European Central Bank’s policy outlook after it left rates changed as expected.

The Stoxx 600 slipped 0.5% by the close, recovering from an earlier decline of as much as 1.2% and close to erasing its gains for 2023. Automakers slumped following disappointing quarterly results from Mercedes-Benz Group AG and Volvo Car AB. Consumer products and luxury goods-makers also underperformed, while real estate and chemicals gained.

ECB policymakers kept the deposit rate unchanged at a record-high 4% on Thursday, following last month’s knife-edge decision to lift the rate. The central bank hasn’t shut the door to further hikes should inflation fail to ease quickly enough, but there’s little doubt among economists and investors that the high point for euro-zone borrowing costs has been reached following 10 back-to-back moves starting in July 2022.

“Unless there’s an external shock to energy prices, we think the ECB is done with hikes for the current cycle,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. “The first ECB cuts will likely only come in the second half of next year, with weaker data and softer markets before it gets better.”

Among individual movers, banks Standard Chartered Plc and BNP Paribas SA declined after reporting underwhelming earnings. Advertising giant WPP Plc also edged lower after slashing its outlook for revenue growth. 

Siemens Energy AG sank to a record low after seeking €16 billion ($16.8 billion) in state aid. The meltdown in its shares on Thursday was the biggest drop for a stock on Germany’s DAX index since the collapse of Wirecard in June 2020. Its main share holder Siemens AG dropped as much as 5.9%.

European stocks are tracking their third straight month of declines on the back of higher bond yields and a lackluster reaction to corporate earnings. 

“The higher-for-longer interest rates environment is very dangerous for stocks as it significantly increases chances of recession and an earnings slump,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets. “We have a negative outlook on equity markets for the rest of the year.”

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--With assistance from Michael Msika, Kit Rees, Jan-Patrick Barnert and Allegra Catelli.

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