Europe open: Shares lower on Fed hike, US bank woes, China PMI

European markets opened lower on Thursday as investors digested the latest rate rise by the US Federal Reserve and looked ahead to the European Central Bank’s next policy decision, all while the corporate earnings and trading update deluge continued unabated.

The benchmark Stoxx 600 index was 0.8% lower in early deals, with oil prices continuing to slide on fears of a global economic slowdown. Fears persisted about the behaviour and financial stability of US banks as shares of PacWest Bancorp plunged 56% in extended trading on Wednesday after reports it was assessing strategic options, including a possible sale.

The Federal Reserve lifted rates by an expected 25 basis points, with signs that the cycle of rises may be at an end. On the Continent, expectations are for the ECB to also increase rates again as it tries to tame inflation in the eurozone. Traders are betting on a 25 point hike.

‘’Worries are swirling that persistently high interest rates could be like a sledgehammer descending on the US economy, to try and crack the nut of stubborn inflation," said Hargreaves Lansdown analyst Susannah Streeter.

"This concern has pushed down the oil price again, reflecting traders’ assessment that demand for energy will shrink globally if the US is pushed into a deeper recession than expected, amid softening demand elsewhere in the world. Brent crude slid to $72 a barrel during early trade in Asia, dropping 11% this week as fears were fueled about a slowdown, although some losses were recouped later in the session."

In other economic news, German exports fell more than expected in March, with exports to the US down by 10.9% and shipments to China dropped 9.3%, according to official data.

There was also worrying news from China, as the smaller Caixin PMI survey showed a slowdown in manufacturing activity.

In equity news, shares in oil giant Shell rose as it post first-quarter adjusted earnings of $9.6bn, beating estimates of $8.6bn.

Budweiser-owner Anheuser-Busch InBev reported core earning of $4.76bn, up by 13.6% from the first quarter of 2022.

Virgin Money fell 7% as it reported weaker first half profits as provisions for bad debts soared.

Reporting by Frank Prenesti for Sharecast.com