Europe stocks suffer worst session for five weeks after Fed outlook; Bank of England holds rates

European markets fell sharply on Thursday after the U.S. Federal Reserve indicated that fewer rates cuts are on the horizon.

The pan-European Stoxx 600 index closed 1.51% lower, notching its worst session since Nov. 12, with all sectors and major bourses in negative territory.

The move lower followed a Wall Street sell-off on Wednesday. The Fed cut its overnight borrowing rate by 25 basis points to a target range of 4.25% to 4.5% and signaled there will likely only be two rate cuts in 2025, rather than the four cuts indicated in its previous forecast.

“We moved pretty quickly to get to here, and I think going forward obviously we’re moving slower,” Fed Chair Jerome Powell said at the post-meeting press conference.

The comments prompted panic on Wall Street, with U.S. stocks plunging as bull market sentiment was dealt a blow. Overnight, Asia-Pacific markets and currencies also fell.

While sentiment remained downbeat in Europe, U.S. markets opened higher on Thursday, with the Dow Jones Industrial Average rebounding 0.9%.

The Bank of England left rates unchanged at 4.75% at its December meeting after U.K. inflation rose to an eight-month high in November. The central bank’s decision was in line with expectations, though traders were surprised by the fact that three policymakers voted for a rate cut while six voted for a hold, a move dovish mix than forecast.

In other central bank news, Sweden’s Riksbank announced a 25-basis-point rate cut Thursday, and Norway’s central bank left its own policy rate unchanged, but suggested it could begin reducing rates in March of 2025.

— CNBC’s Jeff Cox contributed to this market report