European stocks slide as hawkish Fed fuels rate-hike bets

European markets declined Thursday after the Fed held rates at 3.5%-3.75% but projections showed nine of 19 policymakers expect a hike this year.reuters+1
Chairman Kevin Warsh stripped forward guidance from the Fed statement in his debut, while the Bank of England also held rates steady Thursday.cnbc+1
Falling oil prices after the U.S.-Iran interim peace deal dragged energy and mining stocks lower, with Brent crude dipping below $79 per barrel.cnbc+1

European equities slid on Thursday as investors digested the Federal Reserve's hawkish stance from the prior day, with concerns about potential U.S. rate hikes outweighing optimism from the emerging U.S.-Iran peace deal. The pan-European STOXX 600 edged lower, while Britain's FTSE 100 fell more than 1%, dragged down by energy and mining stocks as commodity prices weakened.reuters+1

A Hawkish Fed Sets the Tone

The selloff followed the Federal Reserve's Wednesday decision to hold its benchmark rate at 3.5% to 3.75% for a fourth consecutive meeting — the first under new Chairman Kevin Warsh. While the hold was widely expected, the accompanying projections rattled markets: nine of 19 Fed policymakers now expect at least one rate hike before the end of 2026. Warsh used his debut press conference to strip forward guidance from the Fed's statement, signaling a break from his predecessor Jerome Powell's approach. CME FedWatch data showed markets rapidly repricing, with the probability of rates staying unchanged through year-end falling to about 14%, down from roughly 40% a day earlier.foxbusiness+5

Oil Drops, Energy Stocks Drag

The U.S.-Iran memorandum of understanding, announced over the weekend and set for a formal signing in Geneva on June 19, continued to weigh on crude prices. Brent crude fell further on Thursday, dipping below $79 per barrel — its lowest since March — as the International Energy Agency warned of a potential supply surplus in 2027. The decline hit energy heavyweights hard. TotalEnergies , which had already dropped nearly 9% on Monday following the initial deal announcement, extended losses. BP and mining stocks also weighed on the FTSE 100, which was down more than a full percentage point by midday in London.cnbc+3

Bank of England Holds Steady

The Bank of England held its base rate at 3.75% on Thursday, as widely anticipated. Governor Andrew Bailey has signaled caution as the central bank assesses whether energy-driven inflation from the Iran conflict will prove persistent, with the BoE forecasting inflation could rise above 3.5% later this year. UK labor data released Thursday showed the unemployment rate dipping to 4.9%, while wage growth held at 4.4%, adding complexity to the rate outlook. Analysts at Bank of America expect the BoE could still hike rates at its July or September meetings, leaving traders closely watching Bailey's forward guidance for further clues on the path ahead.mortgageonefinance+4

Sources (39)