European stocks fell slightly at the end of Thursday’s trading, as banks led the decline after the Bank of England followed the example of the US Federal Reserve and the Swiss National Bank in raising interest rates amid fears of banking contagion.
The pan-European Stoxx 600 index fell 0.2% after closing at its highest level in more than a week on Wednesday, according to Reuters.
US stock indices rallied after a turbulent session on Wall Street, as the Federal Reserve raised interest rates by a widely expected 25 basis points and signaled that it was unlikely to rise much further.
The Swiss National Bank also raised its benchmark interest rate by 50 basis points and the Norges Bank raised it a quarter of a percentage point, both in line with market expectations.
Meanwhile, the Bank of England raised interest rates by another quarter of a percentage point and said it expected the rise in British inflation to ease faster than before. Britain’s FTSE 100 fell 0.9% as the British pound rose against the dollar following the Bank of England’s decision.
The European banking sector fell 2.4% after a temporary rebound earlier this week when Swiss bank UBS agreed to buy smaller rival Credit Suisse in a $3 billion bailout.
Meanwhile, Citigroup downgraded the sector’s credit rating, warning that the rapid pace of interest rate hikes would affect economic activity and bank profits.