The pan-European STOXX 600 index hit its lowest level since February 2021, Led by interest-rate sensitive tech stocks and real estate stocks, both down more than 4%, with the latter hitting more than two-year lows.
The Federal Reserve signaled more hikes after applying its third rise of 75 basis points of the year on Wednesday, and sounded less hopeful of a soft landing for the US economy.
The markets have had to reckon with several central bank decisions this week, rate increases in Sweden, Switzerland, Norway and the United Kingdom, and foreign exchange intervention in Japan.
“Markets are trying to digest all the central bank action of the last 24 hours,” said Giles Coghlan, chief markets analyst at HYCM. “Operators see that higher interest rates are coming, not only in the US, but also in the UK and Europe. So there’s not much reason for them to cheer.”
Elizabeth Schnabel, member of the executive council of the European Central Bank, stated that interest rates must continue to rise as inflation remains too high, even as the eurozone faces an economic downturn.
The STOXX 600 suffered its second consecutive month of fallssince Europe is also facing a energy and cost of living crisis amid war between Russia and Ukraine, which hinders gas flows. In the face of possible blackouts during the boreal winter, analysts foresee a deeper recession for the euro zone.
Data on Thursday showed that euro zone consumer confidence fell 3.8 points in September, more than expected, from August.
London’s FTSE 100 index fell 1.1% after the Bank of England raised rates by 50 basis points and said it would continue to “respond strongly, as necessary” to inflation, despite the economy entering in recession
Shares in Spanish bank Sabadell rose 5% after receiving indicative offers from France’s Worldline, Italy’s Nexi and US Fiserv for its payments division, which sources said was valued at up to 400 million euros (393.64 millions of dollars).