European stocks fell sharply Thursday as investors digested the latest comments from the U.S. Federal Reserve.
The pan-European Stoxx 600 dropped 2.3% in early trade, with travel stocks shedding 4% as all sectors and major bourses tumbled into negative territory.
Investor reaction to the Fed’s latest economic forecast will be in the spotlight Thursday. The U.S. central bank kept interest rates unchanged on Wednesday and indicated it does not expect to raise them through 2022. The Fed also said it expects the U.S. economy to contract by 6.5% in 2020 before expanding by 5% in 2021.
“We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates,” Fed Chairman Jerome Powell said. “What we’re thinking about is providing support for the economy. We think this is going to take some time.” Stocks in Asia Pacific traded lower on Thursdayfollowing the outlook.
Coronavirus developments also remain a key concern for markets. On Wednesday, the cancellation of the hugely popular Coachella and Stagecoach music festivals were announced, as California’s Riverside County Public Health Officer Dr. Cameron Kaiser issued an order, citing fears of worsening Covid-19 spread in the fall. Several U.S. states that were among the first to reopen from lockdown have reported surges in cases and hospitalizations.
Biggest movers
Lufthansa stock fell 7.5% in early trade after announcing that up to 26,000 employees could be at risk of job losses. Cruise operator Carnival plunged 9.9% to sink to the bottom of the Stoxx 600.
Unilever was one of only a handful of European stocks in positive territory, gaining 3.2% after the company said it would merge its dual-headed structure to allow for greater M&A flexibility.
— CNBC