By Peter Nurse
Investing.com - European stock markets slumped Thursday as investors fretted about future economic growth as central banks aggressively tighten monetary policy to combat surging inflation.
By 3:40 AM ET (0740 GMT), the DAX in Germany traded 2% lower, the CAC 40 in France fell 1.8%, and the UK’s FTSE 100 dropped 1.5%.
The U.S. Federal Reserve on Wednesday announced its biggest interest rate hike since 1994, lifting the target Federal Funds rate by 75 basis points while also pointing to further steady rises this year.
This move had been widely expected following last week’s dramatic rise in U.S. consumer prices for May, but still raises the specter of a sharp slowdown in growth in the world’s largest economy.
The European Central Bank last week signaled a rate hike in July, and on Wednesday promised a new scheme to try and prevent a new debt crisis in the euro currency area's southern rim.
This move paves the way for the ECB to deliver three, 50 basis point interest-rate increases this year, said Deutsche Bank in a note, with "the deployment of the anti-fragmentation tools clears the pathway for policy rate liftoff and an accelerated tightening cycle."
The Swiss National Bank unexpectedly raised interest rates for the first time since 2007, lifting the policy rate Thursday by 50 basis points to -0.25%, citing a pickup in inflation for the move.
This places the Bank of England in the spotlight, as the central bank holds a policy-setting meeting later Thursday.
It is expected to hike interest rates by 25 basis points for the fifth consecutive meeting, but there are some concerns that the Bank of England will be tempted to follow the Fed’s path and announce a more aggressive rate hike with inflation at 9% in the 12 months to April, the highest rate for 40 years.
In corporate news, ASOS (LON:ASOS) stock slumped 19% and rival Boohoo (LON:BOOH) stock fell 12% with both British online fashion retailers reporting slowing sales as inflationary pressures affected shopping behavior.
Roche (SIX:RO) stock fell 0.6% after the Swiss drugmaker announced a setback in the development of its Alzheimer's medicine.
Oil prices edged higher Thursday, rebounding after sharp losses during the previous session, supported by tight supply and strong global demand.
Prices slipped more than 2% overnight after the Federal Reserve hiked interest rates, but the sentiment in the market overall remains bullish as global supply is crimped by sanctions on Russian oil while demand in China, the world’s largest importer, is set to rebound from COVID restrictions.
U.S. crude stocks rose in the week through June 10, data from the U.S. Energy Information Administration showed Wednesday, but gasoline inventories fell as demand from American drivers remained strong despite the record prices.
By 3:40 AM ET, U.S. crude futures traded 0.3% higher at $115.67 a barrel, while the Brent contract rose 0.3% to $118.86.
Additionally, gold futures rose 0.6% to $1,831.05/oz, while EUR/USD traded 0.6% lower at 1.0385.