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Europe Markets: European stocks slip and U.S. bond yields rise as markets react to Fed shift

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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
SXXP,
-0.39%
,
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
SPX,
-0.54%

on Wednesday, U.S. stock futures
ES00,
-0.39%

NQ00,
-0.57%

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
TMUBMUSD10Y,
1.566%

was 1.56% after holding below 1.50% for several days.

Most sectors in Europe pulled back, though banks including HSBC Holdings
HSBA,
+2.58%

and BNP Paribas
BNP,
+3.30%

rose, on the prospect for higher bond yields and better margins.

Travel and leisure stocks also advanced, with airlines Ryanair
RY4C,
+3.10%

and easyJet
EZJ,
+3.70%

each advancing 4% amid speculation the U.K. could ease travel restrictions.

Premier Inn operator Whitbread
WTB,
+2.74%

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
TRN,
+3.39%

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.

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