European stocks slipped at the open on Thursday after the US Federal Reserve’s decision to raise interest rates by an aggressive 75 basis points overnight.
The pan-regional Stoxx 600 index was down 0.3% in early deals with major continental bourses all lower. US futures were all down by more than 1%.
The Fed on Wednesday raised its target interest rate by 75 basis points, its biggest rate hike since 1994, and projected a slowing economy and rising unemployment in the months to come.
Investors were also watching the Bank of England policy later in the day, which is expected to see another rise in rates.
“Relief has rippled through financial markets that the Federal Reserve hasn’t dropped the ball when it comes to trying to tackle inflation but there are still concerns that central banks are playing a tough game of catch up and could overshoot in their efforts to rein it in,” said Hargreaves Lansdown analyst Susannah Streeter.
“There is a growing expectation that this hike will be followed by another 0.75% rise in an attempt to front load efforts and bring down demand more quickly, even though this is expected to dent growth and see unemployment rise.”
“Risks that there will be an uncomfortably hard landing for the US economy remain but it seems policymakers feel this may be a price to pay given the inflation shock the world is facing.”
In equity news, retail shares were out of favour after UK online fashion retailer ASOS slumped on the back of a warning that surging inflationary pressures were affecting shopping behaviour.
German rival Zalando dropped 10%, JD Sports Fashion and UK brand Marks & Spencer were both 5% lower.
Shares in THG plunged – down 18% at one point – after Belerion Capital said it no longer planned to make an offer for the online retailer.
