European stocks are set to follow Asian stocks sharply lower on Thursday after the U.S. Federal Reserve signaled it is moving closer to slowing the pace of bond purchases later this year as long as the economy sustained its improvement.
Fed Chairman Ben Bernanke indicated that the $85 billion-a-month bond-buying program may end altogether by mid-2014 if the economy performs in line with Fed projections. The U.S. central bank played down the low inflation figures, but pledged to keep short-term interest rates at record lows until the jobless rate reaches 6.5 percent.
The Asian markets are tumbling, with the markets in Australia, Hong Kong, India, Indonesia, Japan, Singapore and South Korea losing 2-3 percent, as fresh worries over the health of Chinese economy added to the disappointment over the Fed's remarks.
A private survey showed that China's manufacturing activity shrank at a faster pace to a 9-month low in June. The HSBC flash manufacturing PMI dropped to 48.3 from 49.2 in the previous month, weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures.
Trading in the U.S. later today will continue to be impacted by reaction to the Fed statement and data releases on weekly jobless claims, existing home sales and Philadelphia-area manufacturing activity. The Dow and S&P 500 fell about 1.4 percent each overnight, while the tech-heavy Nasdaq slid 1.1 percent.
Closer home, a slew of data on German producer prices and U.K. retail sales as well as PMI reports from major European economies due in the European session could influence market sentiment.
In corporate news, ING Group announced that it has sold its 49 percent stake in Korean insurance venture KB Life Insurance Company to joint venture partner KB Financial Group for KRW 166.5 billion or about EUR 115 million.
U.K. Chancellor of the Exchequer George Osborne said that the government is "actively considering" options for selling its stake in Lloyds Banking Group and will examine the case for breaking up Royal Bank of Scotland Group and hiving off its assets into a bad bank.
The European Commission has fined Germany's Merck KGaA 21.4 million euros, of which it will share a 7.77 million euro fine jointly with its former subsidiary Generics U.K., for delaying market entry of cheaper generic versions of Danish company Lundbeck's branded citalopram.
European stocks ended Wednesday's session with losses as investors refrained from taking risk ahead of Bernanke's speech. Banks bore the brunt of the selling after a British Parliamentary commission on banking standards called for criminal sanctions against "reckless" bankers. The benchmark indexes in Germany, France and the U.K. fell between 0.4 percent and 0.6 percent.
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Market Analysis
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.