FX.co ★ European Stocks Extend Downturn

European stocks experienced significant declines on Thursday, with markets closing markedly lower due to forecasts of increased interest rates from the Federal Reserve and escalating geopolitical tensions in the Middle East. The STOXX 50 index decreased by 1.3% to a level of 5,200, while the STOXX 600 saw a more modest decline of 0.8%, settling at 536. Ongoing missile exchanges between Israel and Iran, coupled with the United States maintaining a hard stance against Iran, have heightened fears of potential U.S. involvement, which could amplify the conflict's impact on major economies.

On monetary policy, the Federal Reserve opted to keep interest rates unchanged. However, members of the Federal Open Market Committee (FOMC) scaled back the expected magnitude of future rate cuts, indicating that policymakers are concerned about inflation driven by tariffs and increased fiscal deficits. The decline in stocks was widespread, with all sectors ending in negative territory. Notably, Adyen dropped 3.5%, emerging as the biggest loser in the tech sector for the second consecutive session. Additionally, all banking stocks in the STOXX 50 fell by over 1.5%. Luxury goods giant LVMH experienced a 2.5% drop, fueled by persistent pessimism regarding its future prospects and a spate of broker downgrades.