European stock markets drop before UK rate call

European stock markets declined at the start of trading on Thursday, as caution prevailed before a key interest rate decision from the Bank of England.

In initial deals, London's benchmark FTSE 100 index lost 0.2% at 7 155.53 points compared with Wednesday's closing level.

In the eurozone, Frankfurt's DAX 30 index sank almost 0.6% to 11 262.84 points on festering worries over the German economy, while the Paris CAC 40 index shed nearly 0.1% to 5 075.75.

Later on Thursday, at 15:00, the Bank of England will unveil the outcome of its latest monetary policy committee meeting.

However, analysts expect BoE policymakers to keep the central bank's key lending rate at 0.75% amid increasing signs Brexit uncertainty is weighing on economic activity.

"It's set to be an important day for the pound today as the Bank of England gets set to meet for its latest rate decision and quarterly look at the UK economy," noted CMC Markets analyst Michael Hewson.

"Given the weakness seen in some of the recent (data), it is hard to imagine that there will be any surprises."

Output in Britain's dominant service sector almost ground to a halt in January, data showed this week, as the nation braces to leave the European Union at the end of March.

The IHS Markit/CIPS UK services purchasing managers' index fell to 50.1 - its lowest level in two and a half years - down from 51.2 a month earlier. A reading above 50 indicates growth.

Concerns about Britain's impending departure from the European Union dampened demand and caused firms to delay making decisions on new projects.

The news followed disappointing purchasing managers' index (PMI) readings for the both manufacturing and construction sectors in January.