European Stocks Sharply Lower; BOE, SNB Set to Follow Fed's Lead

By Peter Nurse

Investing.com - European stock markets traded sharply lower Thursday as investors digested another large interest rate hike by the U.S. Federal Reserve, likely setting the scene for aggressive monetary tightening by the Bank of England and the Swiss National Bank.

By 03:35 ET (07:35 GMT), the DAX in Germany traded 1.1% lower, the CAC 40 in France fell 1.2%, and U.K.’s FTSE 100 fell 0.7%.

The U.S. central bank lifted rates by 75 basis points on Wednesday as widely expected, and pointed to more rate hikes ahead, a steeper and longer trajectory than markets had priced in.

Fed Chair Jerome Powell said the central bank is now willing to risk weakness in the economy as it moves to rein in inflation. This slowdown is likely to have a wider impact given the U.S. economy’s role as a major global growth driver.

Other major central banks are also expected to aggressively hike rates later Thursday to curb high inflation, with the Bank of England, the Swiss National Bank, and the Norges Bank in Norway all scheduled to hold meetings today.

The European Central Bank raised its interest rates by 75 basis points last week, and will need to continue doing so despite slowing growth as inflation is too high, said European Central Bank board member Isabel Schnabel earlier Thursday.

The main economic data release in Europe Thursday will be consumer confidence figures for the Eurozone, which are expected to show a deterioration in September to -25.8, from -24.9 in August.

In corporate news, Credit Suisse (SIX:CSGN) stock fell 3% after the Financial Times reported that the Swiss lender has drawn up plans to split its investment bank in three, looking to sell profitable units in order to prevent a damaging capital raise.

HSBC (LON:HSBA) stock fell 1.3% after the bank's asset management unit said it will phase out coal-fired power and thermal coal mining from its listed holdings.

Oil prices edged higher Thursday, rebounding after falling to near two-week lows during the previous session as a combination of inventory stock builds, a tightening monetary policy, and a stronger dollar weighed.

U.S. crude inventories rose by 1.1 million barrels last week, according to data from the Energy Information Administration. Additionally, the hawkish stance of the Federal Reserve raised fears of a global recession while also lifting the dollar to a 20-year high, making crude more expensive for foreign buyers.

By 03:35 ET, U.S. crude futures traded 0.7% higher at $83.52 a barrel, while the Brent contract rose 0.6% to $90.35. Both contracts fell more than 1% on Wednesday, and are on track for the first quarterly loss in more than two years.

Additionally, gold futures fell 0.5% to $1,666.90/oz, while EUR/USD edged 0.1% higher to 0.9850.