European stocks experience fallout from US Fed hike

Retail stocks were the biggest decliners, with online retailers slumping after Asos Plc cut its forecast and Boohoo Group Plc recorded its first UK sales decline

The Federal Reserve's interest rate hike was the biggest made by the US central bank since 1994.

European shares fell as investors weighed risks to growth from surging inflation after the Federal Reserve went ahead with the biggest rate increase since 1994.

The Stoxx Europe 600 Index was 1.5% lower by 8:40am in London, with all sectors lower. 

Retail stocks were the biggest decliners, with online retailers slumping after Asos Plc cut its forecast for full-year sales and Boohoo Group Plc recorded the first UK sales decline in its history.

While US equities rallied on Wednesday after the Federal Reserve indicated that outsized interest rate hikes are unlikely the norm in upcoming policy meetings, the gains didn’t last for long. 

Futures contracts on the S&P 500 Index and the tech-heavy Nasdaq 100 are slumping this morning as investors turn their attention to the risks to economic recovery and profits from rampant inflation.

“The Fed delivered as expected but inflation will remain high in the short term and the question on how it will affect growth persists,” said Silvia Garcia-Castano, head of investments at Tressis in Madrid. 

“This same dialog will remain in the coming months and volatility will be high but we don’t see a repeat of the 2008 crisis as corporates are in a much better position now and central banks will keep their support, even if it’s less or in a different way.” 

The Spanish private banking firm has a neutral position in equities, with a preference for US stocks, and expects volatility to remain high this year.

The European equities benchmark has been hammered this year as worries of hawkish central banks and a potential recession dent demand for risk assets, despite stock valuations falling well below their long-term averages.

The Bank of England is set to deliver a fifth-straight rate hike on Thursday, with officials expected to stick to a steady path.

Among individual moves, Asos slumped as much as 21%. Other former lockdown winners and e-commerce stocks, including Zalando SE and Delivery Hero SE, also fell.

• Bloomberg