European stocks slide after Fed, before ECB rate calls

Asian markets rose Thursday in spite of a decision by the Fed to raise interest rates yet again. ©AFP

London (AFP) - European stock markets slid Thursday after the Federal Reserve again hiked US interest rates to fight elevated inflation, while hinting the next move could be a pause.

The European Central Bank was expected to hike its own interest rate Thursday as prices of goods and services continue to rise at a strong pace.

Ahead of the ECB decision, Norway's central bank lifted its key interest rate -- and warned that it would probably increase the rate again in June.

"The dollar sold off on the idea that the Fed will now take a breather and pause the rate hikes, and perhaps on the idea that the ongoing bank stress will likely make the Fed change its mind regarding a rate cut later this year," noted Swissquote analyst Ipek Ozkardeskaya.

Fresh banking fears

Fears of widespread banking turmoil were revived as shares in regional US lender PacWest plummeted by more than half.

The selloff was apparently spurred by reports the bank was considering the possibility of a sale or other capital-raising measures in the wake of the recent collapses of other mid-size lenders.

PacWest sought to reassure investors in a statement, insisting it had not "experienced out-of-the-ordinary deposit flows" since the banking fears first arose, and that its "cash and available liquidity remains solid".

The bank said it was routine to "continuously review strategic options", adding it had been "approached by several potential partners and investors".

Oil prices were steadier after sliding the previous day on expectations of weaker demand owing to an economic slowdown.

Also on investors' minds were fears that Democrats and Republicans might fail to strike a deal on raising the US debt ceiling, triggering a damaging default as early as June 1.