European markets closed lower Thursday as the Bank of England opted for a more hawkish 50 basis point rate hike.
The benchmark Stoxx 600 closed 0.5% lower, trimming earlier losses of more than 1%. Banks dropped 2% while autos decreased 1.4%. The index has posted declines in all four sessions so far this week.
European markets
The Monetary Policy Committee voted 7-2 to raise the Bank Rate to 5% to tackle the U.K.'s stubbornly high inflation. Analysts were divided on whether the BOE would hike by 25 or 50 basis points, although the majority favored the former.
The FTSE 100 index was little-changed by the news, lower by 0.9%. Sterling was initially flat against the U.S. dollar and euro before declining against both currencies. Two-year U.K. bond yields nudged 2 basis points higher as the 10-year yield fell 2 basis points.
It came after the Swiss National Bank announced a 25 basis point rate rise, its fifth consecutive hike, Thursday morning. Thomas Jordan, chairman of the governing board of the Swiss National Bank, told CNBC that monetary policy was still not sufficiently tight to ensure price stability in the coming years.
In the U.S., Federal Reserve Chairman Jerome Powell on Wednesday forecast more rate hikes this year, saying that "the process of getting back down to 2% has a long way to go."
"Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year," Powell said in remarks prepared for testimony before the House Financial Services Committee Wednesday.Â
Mobeen Tahir, director of macroeconomic research and tactical solutions at WisdomTree, said caution was driving investors into thematic equity investing as they position for uncertainty.
"They are looking to add risk, but they are doing it very selectively," he told CNBC's "Squawk Box Europe."
"They are being cautious. They haven't forgotten about the need to hedge risks and to continue seeking strong core exposures…that can withstand in all sorts of market conditions. But tactically and strategically they are looking to add risk with themes that are hot right now, and AI is one."
U.S. stocks, like Asia-Pacific stocks, were mixed on Thursday.