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European equities fell on Thursday with lenders leading declines after the US Federal Reserve delivered a smaller rate hike amid worries of a bank contagion.
The continent-wide STOXX 600 index (.STOXX) slipped 0.7% after closing at its highest level in more than a week on Wednesday.
US stock futures, however, stabilised following a turbulent session on Wall Street after the Fed lifted interest rate by a widely expected 25 basis points and signalled that they are unlikely to climb much higher, reported Reuters.
“Bear in mind that the market is still pricing more than two rate cuts by year-end. We doubt this pricing can really stand against sticky inflation, growth in the US, but also in Europe and China actually reaccelerating,” said Max Kettner, chief multi-asset strategist at HSBC Global Research.
“Our view remains that the first Fed rate cut will only come in summer 2024, which leaves a lot of room for hawkish repricing.”
Further weighing on the mood, US Treasury Secretary Janet Yellen told lawmakers that she had not considered or discussed “blanket insurance” to banking deposits after the failure of two U.S. mid-sized lenders earlier this month.
European banks (.SX7P) fell 2.1% after a tentative rebound earlier this week when UBS Group (UBSG.S) agreed to buy embattled Swiss lender Credit Suisse (CSGN.S) in a $3 billion rescue deal.
