LONDON — European stocks pulled back on Thursday as global markets react to the Federal Reserve's signal that rate hikes will come sooner than expected.
The pan-European Stoxx 600 fell 0.3% in early trade, with utilities shedding 1.1% to lead losses while banks bounced 2% on the prospect of interest rate hikes.
Global market sentiment has been dominated overnight by the reaction to the latest Fed policy meeting in which the central bank raised inflation expectations and forecast rate hikes as early as 2023.
As expected, the policymaking Federal Open Market Committee unanimously left its benchmark short-term borrowing rate anchored near zero. But officials indicated that rate hikes could come as soon as 2023, after saying in March that it saw no increases until at least 2024. The so-called dot plot of individual member expectations pointed to two hikes in 2023.
U.S. stocks fell during Wednesday's regular session after the Fed's initial statement and economic projections and overnight; U.S. stock futures dipped in early premarket trade and shares in Asia-Pacific mostly pulled back on Thursday.
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U.S. markets rallied off their intraday lows Wednesday after Fed Chair Jerome Powell said projections for future rate increases should be "taken with a big grain of salt" and reiterated that he believes that inflation is transitory.
Powell also did not issue guidance on when the central bank will begin tapering its bond-buying program.
The Fed chair said the central bank will continue to monitor the economic recovery and will provide "advanced notice" before announcing any updates regarding tapering.
Read more: The Fed moves up its timeline for rate hikes as inflation rises
Final euro zone inflation figures for May are also due Thursday.
In terms of individual share price movement, British travel booking company Trainline climbed 5.2% to lead the Stoxx 600 in early trade after reporting strong quarterly net ticket sales.
At the bottom of the index, safety equipment group Halma fell 4.4%.
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- CNBC's Jeff Cox and Hannah Miao contributed to this market report.
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