Europe: Stocks dip at open after Fed hike, before BOE

EUROPE'S stock markets opened lower on Thursday (Jun 16) as investors digested a sharp Federal Reserve interest rate hike to tackle soaring inflation, and before a widely-expected increase from the Bank of England (BOE).

London's benchmark FTSE 100 index dropped 0.5 per cent to 7,236.65 points before the BoE rate call due at 1100 GMT.

In the eurozone, Frankfurt's DAX also shed 0.5 per cent to 13,422.98 points and the Paris CAC 40 lost 0.3 per cent to 6,013.07.

Asian equities, however, rose as the region's traders cheered a Fed hike that signalled its intent to drive inflation down from four-decade highs.

The 0.75 per centage point jump - the biggest in nearly 28 years - had been widely expected by investors after recent data showed inflation at its highest since 1981, driven mostly by energy and food costs.

But sentiment was dampened somewhat after Fed boss Jerome Powell said such big moves would not be commonplace.

Later on Thursday, the BOE is forecast to raise its key interest rate for a fifth straight time to cool runaway inflation that is causing a cost-of-living crisis in Britain.

Economists forecast the BOE will hike borrowing costs by a quarter-point to 1.25 per cent, the highest since the global financial crisis in 2009.

Richard Hunter, head of markets at Interactive Investor, said both the BOE and Fed were battling runaway inflation - and hoped their economies would withstand rising borrowing costs.

"Taming inflation remains the chief target," Hunter told AFP.

"Raising interest rates is a relatively blunt tool which carries an inevitable time lag, so both central banks will equally be hoping that (economic) growth can withstand the added pressure."

Europe's equities had risen on Wednesday after the European Central Bank pledged to ease stress in volatile eurozone bond markets. AFP