European markets fall after hawkish Fed comments; Stoxx 600 down 1%

The Bank of England faces the unenviable task of navigating a slowing economy, sky-high inflation and an extremely tight labor market.

The market is broadly pricing in a 50 basis point hike on Thursday to take its main Bank Rate to 3.5%, a slowdown from November’s 75 basis point increase, its largest in 33 years.

Having hit a 41-year high in October, the annual rise in the U.K. consumer price index slowed to 10.7% in November, new figures revealed Wednesday.

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– Elliot Smith

Sterling fell 0.9% against the U.S. dollar on Thursday morning to trade at just above $1.23, as broad risk-off sentiment spread into currency markets, boosting the traditional safe haven greenback.

The euro was also down 0.7% against the dollar at just above $1.06.

The Swiss National Bank increased its benchmark interest rate Thursday for the third time this year, taking it to 1%.

The central bank said it was looking to counter “increased inflationary pressure and a further spread of inflation” with the move.

Inflation in the country remains well above the Swiss National Bank’s target of 0-2%, but is noticeably below the soaring rates of neighboring European countries. Switzerland’s inflation rate remained steady at 3% last month, having dropped from a three-decade high of 3.5% in August.

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– Hannah Ward-Glenton

Beijer Ref shares shares fell 7% in early trade to the bottom of the Stoxx 600 after the Swedish cooling technology firm announced the acquisition of U.S.-based Heritage Distribution.

Swedish medical technology company Getinge also fell 5.8%.

China’s economic reopening is belated, but is much needed to control inflationary pressures in the U.S., Jeremy Siegel, Wharton School of Business professor said on CNBC’s “Street Signs Asia.”

“For the U.S., we import so much from China, if those supply chains get normalized, that would bring down inflation, so I applaud China’s move,” he said. “It’s way too late, it should have been earlier, but it is needed,” he said.

Siegel added that he expects the U.S. Federal Reserve to hike rates once more in February’s meeting by 25 basis points before pivoting.

— Jihye Lee

Investors will have a second opportunity to take part in the stock market rally after China announced a relaxation of Covid-19 restrictions, according to Bank of America.

The bank named more than 10 stocks after having found “green shoots of recovery in high-frequency data” that point toward rising earnings at companies exporting to China.

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— Ganesh Rao

The Fed announced it will raise interest rates by 50 basis points, marking an end to the pattern of 75 point hikes seen in recent months.

Before this move, the Fed had raised rates by 75 basis points at the last four meetings. A basis point is equivalent to 0.01%.

The 50 basis point hike was widely expected ahead of the meeting.

It’s the final policy decision expected from the central bank in 2022.

— Alex Harring

Federal Reserve Chairman Jerome Powell said Wednesday the recent positive signs for inflation aren’t enough for the central bank to ease back on interest rate increases.

“It will take substantially more evidence to have confidence that inflation is on a sustained downward” path, Powell said during his post-meeting news conference.

The comments came as the Fed raised its benchmark rate another half percentage point and indicated at least another three-quarters of a point in hikes are coming. The decision also occurs a day after November’s consumer price index reading was up just 0.1%, an indication that inflation may have peaked.

However, Powell said inflation remains a problem.

“Price pressures remain evident across a broad range of goods and services,” Powell added.

—Jeff Cox

European markets are heading for a lower open Thursday as investors react to the latest monetary policy decision and comments from the U.S. Federal Reserve.

The U.K.’s FTSE 100 index is expected to open 5 points lower at 7,489, Germany’s DAX 51 points lower at 14,410, France’s CAC down 20 points at 6,708 and Italy’s FTSE MIB down 116 points at 24,448, according to data from IG.

There are earnings due from K&M and Currys, and data releases include November new car registrations for several European countries. The Bank of England is expected to announce another rate hike to combat inflation.

— Holly Ellyatt