European markets trade lower after Fed’s Powell signals a rate hike next month

European markets trade lower after Fed’s Powell signals a rate hike next month

European stocks are expected to fall at the open Friday after Federal Reserve Chair Jerome Powell said a half-percentage point rate hike is “on the table” for next month.

The U.K.’s FTSE index is seen down 96 points at 7,531, Germany’s DAX is expected to open 242 points lower at 14,277, and France’s CAC 40 is expected to fall 141 points to 6,582 at the open, according to IG Index.

It comes after a dramatic reversal in stock markets in the U.S. Thursday, with major averages closing lower, wiping out earlier gains.

Earlier in the day, Federal Reserve Chair Jerome Powell commented on the possibility of a larger-than-usual rate hike next month, spooking markets. Speaking during an International Monetary Fund panel moderated by CNBC’s Sara Eisen, Powell said that taming inflation is “absolutely essential.”

“I would say 50 basis points will be on the table for the May meeting,” he added.

U.S. Treasury yields also jumped on the back of Powell’s comments. The yield on the benchmark 10-year Treasury note, which started the year near 1.5%, last stood at 2.955%.

Shares in Asia also fell Friday, as investors reacted to the comments.

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Back in Europe, French voters are heading to the polls Sunday in an election that will decide their next president. The second — and final — round of the election puts incumbent Emmanuel Macron against anti-immigrant party leader Marine Le Pen.

In a note Thursday, Goldman Sachs described the election as a decisive moment for France’s policy path.

“If Mr. Macron is re-elected, we would expect him to revive his reformist agenda as a continuation of his pro-integration plan for Europe,” the analysts, led by Sven Jari Stehn, said.

“These reforms are to a large extent embedded in our current forecasts. Should M. Le Pen be elected, we would expect an institutional impasse owing to the likely lack of a parliamentary majority in next June’s legislative elections and significant friction with EU partners.”

SAP released earnings Friday, flagging a hit to its revenue from its exit from Russia. The German software giant said its decision to leave Russia following its invasion of Ukraine was expected to lead to a negative revenue impact of around 300 million euros ($325 million). Revenue growth at the company surprised to the upside, however, coming in at 11% for the first quarter.

— CNBC’s Yun Li contributed to this report.

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