- Yellen indicates interest rate hike
- Merkel warns Russia of EU sanctions
- Spanish bond yields fall
FTSE 100: -1.15%
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FTSE MIB: -0.47%
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Stoxx 600: -0.80%
European stocks continued to slide on news that the Federal Reserve may raise interest rates in coming months.
Fed Chair Janet Yellen said interest rates would increase "in the order of around six months" after the central bank ends it ends quantitative easing. Analysts had widely expected a rate hike to come towards the end of 2015.
Yellen spoke after the Federal Open Market Committee (FOMC) voted to scale back its asset purchase programme by another $10bn a month to $55bn, its third staged reduction of stimulus, as expected by analysts.
Bond purchases should come to an end in October or November if the Fed continues to taper at the same rate at each meeting.
Yesterday's press conference after the meeting was Yellen's first since taking over as Chair in February and some analysts think her remarks reflected her lack of experience.
"Having seen the market reaction, she may choose her words more wisely in the future and be a little less specific," said Alpari UK analyst Craig Erlam.
IG analyst, Chris Beauchamp, added: "Janet Yellen will be pondering over her performance last night, after she spooked markets with talk of an earlier-than-expected rise in US interest rates.
"Although the Fed's statement implied there would be a 'considerable' gap between the end of QE and the first rate hike, Yellen's definition of considerable as 'around six months' wasn't as long as some had hoped."
Today in the US will be the release of reports on weekly jobless claims and existing home sales.
The Fed will also unveils its Dodd-Frank Act Supervisory stress test results for medium-sized firms, to ensure institutions have sufficient capital to absorb losses and support operations during adverse economic conditions.
Merkel says Russia faces sanctions
Speaking ahead of a European Summit in Brussels, German Chancellor Angela Merkel said Russia faces tougher sanctions if it fails to take action to ease the turmoil over Crimea.
Tensions remain high after Russian President Vladimir Putin signed a treaty on Tuesday accepting Crimea as a sovereign state. It followed a referendum on Sunday which showed an overwhelming support for the region to leave Ukraine.
Pro-Russian forces took over at least two military bases on Wednesday, including Ukraine's navy headquarters in Sevastopol.
Merkel said there would be consequences for Russia "if there is a worsening of the situation".
The EU meets today to assess the situation and decide on its next steps.
Spanish bond yields hit pre-crisis lows
Spain's borrowing costs over five and 15 years fell to their lowest at an auction since the economic crisis began.
The Treasury sold €5bn of three year bonds on Thursday, the top end of the target range of between €4bn and €5bn. Spain has now raised a third of the debt it aimed to sell in the whole of 2014.
France allotted €3.7bn in May 2019 at an average yield of 1.06%, in line with a previous auction on Feb. 20. The Treasury also sold debt due in 2016 and 2017 as well as €1.5bn of inflation-linked bonds maturing between 2018 and 2024.
Both auctions seem to have gone off without a hitch.
Rheinmetall slumped after Germany's Economy and Energy Minister Sigmar Gabriel stopped the company from building a military training centre in Russia's Volga region, Focus magazine reported.
GlaxoSmithKline declined after saying its experimental lung-cancer drug failed to meet its objectives in a clinical study.
Munich Re gained after the reinsurer announced it will buy back shares
worth €1bn before its 2015 shareholder meeting.
Gaming companies Ladbrokes and William Hill edged lower after UK Chancellor George Osborne raised the duty on in-store gaming machines.
The euro fell 0.45% to $1.3771.
Brent crude futures dropped $0.170 to $105.670 per barrel, according to the ICE.