European Shares Set To Drift Lower On Hawkish Tilt By Fed

European stocks are seen opening lower on Thursday as investors react to the Fed and Bank of Japan rate decisions and await the Bank of England’s policy announcement.

The U.S. Federal Reserve on Wednesday cut the key lending rate by 25 basis point as expected but revised its projections to signal just two interest rate cuts next year compared to the four previously forecast, citing stubbornly high inflation.

The hawkish Fed outlook lifted the yield on benchmark U.S. Treasury yields to a seven-month high and the dollar to a two-year peak, denting investors’ appetite for riskier assets.

Fed Chair Jerome Powell’s explicit – and repeated – references to the need for caution from here underscored investor concerns that Trump’s fiscal, trade and tariff policies may fuel inflation and keep U.S. interest rates higher for longer.

Meanwhile, the Japanese yen weakened after the Bank of Japan refrained from raising interest rates, citing persistent uncertainties clouding Japan’s economic outlook and pricing strategies.

The Bank of England is expected to hold interest rates at 4.75 percent later in the day after inflation in November came in above the central bank’s target.

In economic releases, reports on German Gfk consumer climate, German PPI and French business climate may garner investor attention later in the day.

Across the Atlantic, trading may be swayed by the release of weekly jobless claims, existing home sales and Philadelphia Fed manufacturing data. Final revision of Q3 GDP data is also awaited.

Asian markets followed Wall Street higher while gold recovered from a one-month low. Oil prices fell in Asian trade amid the Fed’s shift in policy guidance and fears over China growth.

Media reports suggest that U.S. authorities are considering a ban on China’s TP-Link Technology Co over potential national security concerns.

U.S. stocks succumbed to heavy selling pressure overnight on uncertainty over the Fed’s rate trajectory.

The Dow plummeted 2.6 percent to extend its losing streak to ten straight sessions and hit its lowest closing level in over a month.

The S&P 500 slumped 3 percent to a one-month closing low and the tech-heavy Nasdaq Composite plunged 3.6 percent.

European stocks ended mostly higher on Wednesday after the release of U.K. and Eurozone inflation data and ahead of the Fed’s final rate decision of the year.

The pan European STOXX 600 rose 0.2 percent to end higher for the first time in four days.

The German DAX finished marginally lower while France’s CAC 40 gained 0.3 percent and the U.K.’s FTSE 100 edged up marginally.