Global Economy
European Markets Slip Slightly Ahead of BoE Decision After Fed Signals Rate Hikes
European equity indices opened largely unchanged on Thursday as investors processed the Federal Reserve’s latest minutes, which hint at possible rate hikes later this year. While the Fed kept policy steady, its forward guidance removed any mention of cuts in 2026, fueling speculation of tighter monetary conditions. Meanwhile, markets await the upcoming decisions of the Bank of England, Swiss National Bank and Norway’s Norges Bank, and oil prices dipped after the US‑Iran peace protocol was signed.
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European equity markets stay near‑flat
On Thursday morning European shares showed only modest moves as traders digested the Federal Reserve’s recent statements. The CAC 40 slipped 0.06% to 8,425.42 points at 07:10 GMT. In London, the FTSE 100 fell 0.49%, while Germany’s DAX edged up 0.24%.
Across the broader Eurozone, the EuroStoxx 50 was essentially unchanged (+0.01%), the FTSEurofirst 300 rose 0.02%, and the Stoxx 600 gained 0.13%.
U.S. futures point to a bounce
Wall Street futures indicated a recovery ahead of the next trading day: the Dow Jones futures were up 0.49%, the S&P 500 futures +0.85% and the Nasdaq futures +1.40%.
Fed’s tone shifts toward tighter policy
While the Fed kept its policy rate unchanged on Wednesday, the latest quarterly projections reveal that nine of its members now expect a rise in borrowing costs before year‑end. Moreover, the monetary‑policy statement removed the previously‑included language about possible rate cuts in 2026.
The change surprised markets, especially after new Fed chair Kevin Warsh outlined a sweeping reform agenda and signaled a more restrictive stance to combat persistent inflation.
"The FOMC, now divided, is looking at a rate hike this year. The Fed appears more concerned than expected about stubbornly high inflation," noted Paolo Zanghieri, economist at Generali Investments.
Central‑bank watch list
Investors now turn their attention to upcoming decisions from the Bank of England (BoE), the Swiss National Bank (SNB) and Norway’s Norges Bank. Their guidance will be key in shaping European equity sentiment for the next few weeks.
Geopolitical backdrop and oil prices
On the geopolitical front, risk appetite received a boost after US President Donald Trump and Iranian counterpart Massoud Pezeshkian signed a protocol to end the Iran conflict on Wednesday. The news sent oil prices lower, reflecting reduced war‑risk premiums.
Overall, the market is in a waiting mode, with modest price action and a focus on forthcoming central‑bank cues.