EU stocks slip as investors refine Fed hike bets

European stocks fell on Thursday as cautious investors continued to assess how far and fast the US Federal Reserve will begin raising interest rates this year.

Also keeping a lid on risk taking were the tech-laden US Nasdaq entering correction territory on Wednesday, a sell-off in bonds, still elevated crude oil prices and increased political tensions over Ukraine.

But Chinese stocks were a bright spot after the country cut benchmark mortgage reference rates to ease pressure on its property sector.

The STOXX (.STOXX) index of 600 European companies was down 0.17 per cent at 480 points, below its life-time high of 495.46 points hit in the first week of trading this year. Blue-chip indexes in Frankfurt (.GDAXI), Paris (.FCHI) and London (.FTSE) were all lower.

Gains in Asia helped to counter the pullback in Europe to keep the MSCI all country stock index (.MIWD00000PUS) in positive territory, up 0.16 per cent at 728 points, but still down about 3.8 per cent so far this year.

“There is a tonne of caution now,” said Seema Shah, chief strategist at Principal Global Investors.

“The key factor that markets are thinking about is Fed tightening,” she said.

Rising US interest rates could dent global growth prospects and the earnings outlook for international companies.

A Reuters poll of economists showed they expect the Fed to tighten monetary policy at a much faster pace than