FRANKFURT: European shares slipped on Thursday as investors increased bets on a US Federal Reserve rate hike later this year after policymakers struck a hawkish tone, though easing oil prices offered some relief on inflation.
The pan-European STOXX 600 index closed 0.3 percent lower, snapping a five-day winning streak. Regional bourses were mixed, with France and Germany posting gains while Italy and Spain declined.
Britain’s FTSE 100 ended the day 1 percent lower as losses in heavyweight energy and healthcare stocks weighed.
The Bank of England kept interest rates on hold at 3.75 percent in June, judging it premature to raise rates given uncertainty about inflation pressures. Across Europe, oil and gas shares eased 1.5 percent as oil prices fell to their lowest level since the first trading day of the Iran war. US President Donald Trump signed a deal with Iran to end the war that has disrupted global energy supplies.
The interim pact has brought relief for markets, with energy-price-sensitive travel and leisure shares rising 0.8 percent on Thursday. However, that relief ran short in the face of monetary policy uncertainty.
In the US, the Fed held rates steady on Wednesday, but nine policymakers projected one rate hike this year. In an early sign of new Fed Chairman Kevin Warsh’s influence, the central bank’s statement removed guidance about future rate moves.
“Transitions like this are unsettling for markets. Toss in economic and political volatility, and you get a combination that will confront, confound, confuse, and upset Warsh’s plans to pull the Fed into his promised land,” said Steven Blitz, chief US economist at GlobalData.TS Lombard.
The European Central Bank raised borrowing costs last week and traders anticipate another 25-basis-point rate hike by year-end, according to LSEG-compiled data.