A general view of the Federal Reserve building in Washington, D.C., on May 2, 2020 amid the Coronavirus pandemic. Earlier today, thousands of visitors flocked to the Mall and other scenic sites around the Capital area to see a flyover by Navy Blue Angels and Air Force Thunderbirds in honor of medical personnel and first responders, meanwhile the global confirmed COVID-19 death toll approached 250,000.(Graeme Sloan/Sipa USA)A general view of the Federal Reserve building in Washington, D.C., on May 2, 2020 amid the Coronavirus pandemic. Earlier today, thousands of visitors flocked to the Mall and other scenic sites around the Capital area to see a flyover by Navy Blue Angels and Air Force Thunderbirds in honor of medical personnel and first responders, meanwhile the global confirmed COVID-19 death toll approached 250,000.(Graeme Sloan/Sipa USA)
US Federal Reserve building in Washington, DC. Photo: Graeme Sloan/Sipa USA/PA

European stock markets opened lower on Thursday and US futures were pointing to a sell-off on Wall Street later today, as investors reacted to the latest policy statement from the US Federal Reserve.

On Wednesday, the Fed kept US interest rates near zero and signalled rates were likely to stay that way until at least 2023. Chairman Jerome Powell said the US economy was recovering quicker than expected but warned the outlook was uncertain.

After initially rising on the policy announcement, US stocks began falling as Powell delivered his press conference. Only the Dow closed in the green and, by Thursday morning, US futures were deeply negative across the board. S&P 500 futures (ES=F) were down 1.6%, Dow Jones futures (YM=F) were 1.3% lower, and Nasdaq futures (NQ=F) were off by 1.7%.

READ MORE: Fed signals interest rates to stay near-zero through 2023

While the Fed didn’t deliver any surprises, analysts said the lack of additional stimulus for the US economy had disappointed investors.

“On paper, this is all pro-market stuff,” Connor Campbell, a financial analyst at SpreadEx, said. “Yet, though nothing was necessarily expected, a lack of fresh stimulus seems to have disappointed investors, especially coming alongside as it did a reminder that the country’s recovery is in danger if Congress doesn’t pass a bipartisan spending plan.”

Campbell said investors had also “picked up on the notes of concern sprinkled throughout the [Fed] statement.”

“That two officials voted against Wednesday’s decision also alarmed the markets, suggesting a brewing hawk camp in an FOMC full of doves,” he said.

Viraj Patel, an independent macro strategist, said: “There’s a sense that the Fed has now all but thrown the kitchen sink in and will sit on the sidelines for the time being.”

The risk-off sentiment spread to Europe, where major stock markets opened deeply in the red.

Britain’s FTSE 100 (^FTSE), Germany’s DAX (^GDAXI), and France’s CAC 40 (^FCHI) all fell over 1% in early trade.

Auto stocks were under pressure after the European Automobile Manufacturers Association said new car sales fell by 18.9% in August across the EU.

Renault (RNO.PA) fell 1.1%, Volkswagen (VOW3.DE) stock dropped 0.8%, and Mercedez Benz-owner Daimler (DAI.DE) shed half a percent.

READ MORE: Bank of England to hold fire on policy despite growing pressure

Asian stocks had sold-off overnight, although not as steeply. Japan’s Nikkei (^N225) fell 0.6% and the KOSPI (^KOSPI) in South Korea dropped 1.2%. In China, the Shanghai Composite (000001.SS) fell 0.4% and the Shenzen Component (399001.SZ) was flat. The Hong Kong Hang Seng (^HSI) dropped 1.7%.

Later today attention will turn to the Bank of England, which publishes its latest monetary policy statement at midday London time. The central bank is expected to keep the interest rate at its record low of 0.1% and maintain its programme of bond buying at £745bn.

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