Investors are looking ahead to find the best stock picks for 2023 as the U.S. looks set to fall into recession.
This is CNBC's live blog covering European markets.
European stocks suffered heavy losses Thursday as the European Bank struck a hawkish tone and global markets dipped following the U.S. Federal Reserve's latest policy update.
The pan-European Stoxx 600 closed 2.8% lower provisionally, with technology shedding 4.6%, retail dropping 4%, and travel and industrials falling 3.5%.
Thursday was a big day for central banks in Europe, with monetary policy decisions from the Bank of England, European Central Bank and Swiss National Bank. All three opted for 50 basis point hikes to interest rates as they try to rein in inflation.
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But markets extended earlier losses following the ECB announcement and comments by its president, Christine Lagarde, as she stressed that "significant" further rate rises at a "steady pace" were still to come.
"If you compare with the Fed, we have more ground to cover ... We're not slowing down, we're in for the long game," she said.
The main German and French indexes both plunged more than 3%, while the U.K.'s FTSE 100 lost 1%.
Money Report
Markets in the Asia-Pacific region reacted negatively after the Fed raised its benchmark interest rate to the highest level in 15 years and signaled it will maintain higher rates throughout 2023.
U.S. stocks also tumbled in early Thursday trade.
Federal Reserve Chairman Jerome Powell said Wednesday that recent signs inflation might have peaked weren't enough for the central bank to ease off on interest rate increases.
"It will take substantially more evidence to have confidence that inflation is on a sustained downward" path, Powell said during his post-meeting news conference. U.S. retail sales and jobless claims are due Thursday, providing further indications as to the state of health in the world's largest economy.
European stocks plunge as ECB strikes hawkish tone
Europe's Stoxx 600 index extended losses to 2.6% after the European Central Bank said "significant" further rate rises were ahead as it hiked by 50 basis points.
ECB President Christine Lagarde said: "If you compare with the Fed, we have more ground to cover. We have longer to go. We're not slowing down, we're in for the long game."
The euro area's central bank said the inflation forecasts it uses had been revised up and it does not see inflation returning to its 2% target until 2025, but that it sees any recession in the bloc as being "relatively short-lived and shallow."
It also announced quantitative tightening would begin in March.
The fall in European equities wiped out gains it made Tuesday after a U.S. inflation print came in slightly below expectations, with the Stoxx 600 falling to a near-one month low.
— Jenni Reid
ECB hikes rates, sees significant increases ahead as it announces plan to shrink balance sheet
The European Central Bank opted for a smaller rate hike at its Thursday meeting, taking its key rate from 1.5% to 2%.
It also announced plans to shrink its balance sheet.
The move comes after the latest inflation data for the euro zone showed a slight slow in price rises in November, although the rate remains at 10% annually.
ECB President Christine Lagarde is due to deliver a press conference around 2:45 p.m. CEST.
- Jenni Reid
Bank of England hikes key rate by 50 basis points, will continue to respond ‘forcefully’ if needed
The Bank of England on Thursday hiked its main interest rate by 50 basis points and signaled that more tightening will be needed to rein in inflation.
The Monetary Policy Committee voted 6-3 in favor of the half-percentage-point hike, which takes the bank rate to 3.5%. The rise marks a slowdown from November's 75 basis-point increase.
"The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response," the MPC said in its statement on Thursday.
- Elliot Smith
Sterling, euro fall against U.S. dollar as risk aversion returns
Sterling fell 0.9% against the U.S. dollar on Thursday morning to trade at just above $1.23, as broad risk-off sentiment spread into currency markets, boosting the traditional safe haven greenback.
The euro was also down 0.7% against the dollar at just above $1.06.
Bank of England seen hiking by a half-point as inflation shows signs of peaking
The Bank of England faces the unenviable task of navigating a slowing economy, sky-high inflation and an extremely tight labor market.
The market is broadly pricing in a 50 basis point hike on Thursday to take its main Bank Rate to 3.5%, a slowdown from November's 75 basis point increase, its largest in 33 years.
Having hit a 41-year high in October, the annual rise in the U.K. consumer price index slowed to 10.7% in November, new figures revealed Wednesday.
- Elliot Smith
Swiss central bank hikes interest rates by 50 basis points to counter ‘further spread of inflation’
The Swiss National Bank increased its benchmark interest rate Thursday for the third time this year, taking it to 1%.
The central bank said it was looking to counter "increased inflationary pressure and a further spread of inflation" with the move.
Inflation in the country remains well above the Swiss National Bank's target of 0-2%, but is noticeably below the soaring rates of neighboring European countries. Switzerland's inflation rate remained steady at 3% last month, having dropped from a three-decade high of 3.5% in August.
- Hannah Ward-Glenton
Stocks on the move: Beijer Ref down 7%, Getinge down 5%
Beijer Ref shares shares fell 7% in early trade to the bottom of the Stoxx 600 after the Swedish cooling technology firm announced the acquisition of U.S.-based Heritage Distribution.
Swedish medical technology company Getinge also fell 5.8%.
- Elliot Smith
China reopening is 'needed' to bring down U.S. inflation: Siegel
China's economic reopening is belated, but is much needed to control inflationary pressures in the U.S., Jeremy Siegel, Wharton School of Business professor said on CNBC's "Street Signs Asia."
"For the U.S., we import so much from China, if those supply chains get normalized, that would bring down inflation, so I applaud China's move," he said. "It's way too late, it should have been earlier, but it is needed," he said.
Siegel added that he expects the U.S. Federal Reserve to hike rates once more in February's meeting by 25 basis points before pivoting.
— Jihye Lee
CNBC Pro: Missed China's reopening rally? Bank of America names global stocks to ride the second-leg
Investors will have a second opportunity to take part in the stock market rally after China announced a relaxation of Covid-19 restrictions, according to Bank of America.
The bank named more than 10 stocks after having found "green shoots of recovery in high-frequency data" that point toward rising earnings at companies exporting to China.
CNBC Pro subscribers can read more here.
— Ganesh Rao
Fed announces 50 point rate hike
The Fed announced it will raise interest rates by 50 basis points, marking an end to the pattern of 75 point hikes seen in recent months.
Before this move, the Fed had raised rates by 75 basis points at the last four meetings. A basis point is equivalent to 0.01%.
The 50 basis point hike was widely expected ahead of the meeting.
It's the final policy decision expected from the central bank in 2022.
— Alex Harring
Powell wants 'substantially more evidence' that inflation is cooling
Federal Reserve Chairman Jerome Powell said Wednesday the recent positive signs for inflation aren't enough for the central bank to ease back on interest rate increases.
"It will take substantially more evidence to have confidence that inflation is on a sustained downward" path, Powell said during his post-meeting news conference.
The comments came as the Fed raised its benchmark rate another half percentage point and indicated at least another three-quarters of a point in hikes are coming. The decision also occurs a day after November's consumer price index reading was up just 0.1%, an indication that inflation may have peaked.
However, Powell said inflation remains a problem.
"Price pressures remain evident across a broad range of goods and services," Powell added.
—Jeff Cox
European markets: Here are the opening calls
European markets are heading for a lower open Thursday as investors react to the latest monetary policy decision and comments from the U.S. Federal Reserve.
The U.K.'s FTSE 100 index is expected to open 5 points lower at 7,489, Germany's DAX 51 points lower at 14,410, France's CAC down 20 points at 6,708 and Italy's FTSE MIB down 116 points at 24,448, according to data from IG.
There are earnings due from K&M and Currys, and data releases include November new car registrations for several European countries. The Bank of England is expected to announce another rate hike to combat inflation.
— Holly Ellyatt
