European markets fall sharply as global Fed hike relief rally fades; Stoxx 600 down 1.4%
The pan-European Stoxx 600 dropped 1.4% in early trade, with retail stocks sinking 4.2% to lead losses as all sectors and major bourses started the session in the red.
Global investors have been reacting to the Federal Open Market Committee’s decision to raise its benchmark funds rate to a range of 1.5% to 1.75% — the highest since just before the Covid pandemic began in March 2020.
There was volatility in U.S. markets following the rate hike but stocks eventually closed higher as Fed Chairman Jerome Powell spoke in his post-meeting news conference and said that “clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common.”
He added, however, that he expects the July meeting to see an increase of 50 or 75 basis points. He said decisions will be made “meeting by meeting” and the Fed will “continue to communicate our intentions as clearly as we can.”
Asia-Pacific markets initially rallied on Thursday, but the momentum faded throughout the session to leave a mixed picture by the afternoon.
U.S. stock index futures also gave back earlier gains in premarket trading and now indicate a lower open on Wall Street later in the day, with the volatility coming after a tumultuous week of trading as expectations built around the Fed’s meeting.
The Bank of England will be the latest central bank to publish its interest rate decision on Thursday, and is also expected to hike interest rates for the fifth consecutive monetary policy meeting.
The central bank, like others around the world, is looking to curb rampant inflation against a backdrop of slowing growth and a deteriorating currency.
Data releases in Europe on Thursday include new EU car registrations for May and euro area wage growth in the first quarter. Italian inflation data for May is also set to be released.
In terms of individual share price movement in Europe, German online retailer Zalando slid 10.5% to the bottom of the Stoxx 600.
At the top of the index, British used car dealer Inchcape climbed 4% after a positive trading statement.
