European stock markets sink at open after Fed meeting

The German share prize index (DAX) board is seen at the trading room of Frankfurt’s stock exchange (Boerse Frankfurt) during trading session in Frankfurt October 14, 2016. — Reuters pic

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LONDON, Jan 27 — Europe’s main stock markets sank in opening deals today after the US Federal Reserve signalled the end of pandemic-era cheap cash and flagged a rate hike in March.

In initial trade, London’s benchmark FTSE 100 index dropped 1.0 per cent while Frankfurt’s DAX and the Paris CAC each shed about 1.5 per cent.

Global stocks slumped after Fed boss Jerome Powell took a surprisingly hawkish turn after one of the bank’s most highly anticipated meetings.

“Jerome Powell did not really sooth investors’ nerves,” said Swissquote senior analyst Ipek Ozkardeskaya.

“He said that the Federal Reserve won’t refrain from back-to-back rate hikes to get the inflation situation straight.

“Apparently, the recent market rout has not given cold feet to Powell and the Fed members, meaning that they are ready to take on more losses on the equities front to get inflation under control.”

Powell said the world’s number one economy was well on the recovery path with unemployment largely under control, allowing officials to begin removing the crutches put in place at the start of the pandemic.

In a news conference, he told reporters “the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so”.

Although a March hike was pencilled in by traders for several months, investors were spooked by Powell’s apparent hawkishness as he refused to be drawn on a timetable for further increases nor its plans to unload assets on its balance sheet, which have helped keep costs down. — AFP