European markets fall after Federal Reserve hints at rate hike

European markets have fallen this morning after the US central bank hinted at an interest rate hike next month.

The Federal Reserve decided to leave interest rates unchanged yesterday but the US central bank said it saw “further gradual increases” ahead.

The Euro Stoxx 600, made up of markets in 17 countries, was down 0.7 per cent this morning.

The German Dax also fell 0.7 per cent and the FTSE 100 dropped 0.9 per cent as a rally earlier this week was cancelled out.

In Asia, Hong Kong's Hang Seng Index closed 2.4 per cent down leading the downward charge and Japan's Nikkei ended the day 1.05 per cent down.

“Just as the feel-good factor was beginning to return to the markets, buoyed by the result of the US midterms, the Fed swooped in and brought everyone back down to earth,” Craig Erlam, senior market analyst at Oanda said.

“European markets are following their Asian counterparts lower this morning, as a hawkish Fed quelled bullish sentiment seen throughout much of the week,” Joshua Mahony, market analyst at IG, said.

Markets rallied at the end of last month following a dreadful October for global trading.

The gains extended following the results of the US midterm elections as the dollar weakened.

But the Fed's comments have seemingly put an end to the bullish sentiment.