By Steve Goldstein
European stocks traded lower on Thursday, in their first reaction to news the Federal Reserve was looking to lift interest rates quicker than expected in the world’s largest economy.
The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.99% , whose companies according to FactSet generate more than a fifth of their revenue from the U.S., slipped 0.4%. After a 0.5% dip for the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.95% on Wednesday, U.S. stock futures /zigman2/quotes/209948968/delayed ES00 +0.24% /zigman2/quotes/210219788/delayed NQ00 +0.22% pointed to a further decline.
Markets took a hawkish read of the news that the Fed’s summary of economic projections showed two interest rate increases in 2023 and that it has begun discussing when to slow down the rate of bond purchases. “It might not seem like much, but this move caught the bond traders flat-footed. This was astounding given they had already expected a hawkish surprise. The Fed managed to out-hawk even the hawkish expectations,” said Kevin Muir, the veteran trader and author of The MacroTourist blog.
The yield on the 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.09% was 1.56% after holding below 1.50% for several days.
Most sectors in Europe pulled back, though banks including HSBC Holdings /zigman2/quotes/203901799/delayed UK:HSBA +4.35% and BNP Paribas /zigman2/quotes/206351084/delayed FR:BNP +3.50% rose, on the prospect for higher bond yields and better margins.
Travel and leisure stocks also advanced, with airlines Ryanair /zigman2/quotes/205429530/delayed IE:RY4C +1.70% and easyJet /zigman2/quotes/202825892/delayed UK:EZJ +0.88% each advancing 4% amid speculation the U.K. could ease travel restrictions.
Premier Inn operator Whitbread /zigman2/quotes/207954631/delayed UK:WTB +0.97% rose 4%, after reiterating its outlook for the year, following a fiscal first quarter in which like-for-like sales were 71% below two years ago.
Embattled ticket seller Trainline /zigman2/quotes/212885666/delayed UK:TRN +1.90% jumped 6%, after reporting that its first-quarter ending May 31 revenue jumped 324%. It said net ticket sales at the end of the quarter were 52% of fiscal 2020, the best level since the COVID-19 pandemic began.