European stock markets experienced their sharpest fall in nine months, as the ripple effects of diminished expectations for prompt U.S. interest rate cuts were felt globally. This downturn followed closely on the heels of significant losses on Wall Street, which were triggered by robust U.S. retail sales data. These figures suggested that the Federal Reserve might implement fewer rate cuts this year than initially anticipated.

Key stock indices in both Europe and Asia took substantial hits. The pan-European Stoxx Europe 600 index witnessed its largest single-day drop since last July, falling 1.5%. Similarly, London’s FTSE 100 index recorded a decline of 1.8%, marking its worst performance in nine months. The sell-off in Europe was primarily led by energy companies, banks, and mining firms, which are predominant in the commodity-heavy FTSE 100.

On the other side of the Atlantic, Wall Street also felt the pressure. The S&P 500 index closed down 0.2%, and the Nasdaq Composite edged down by 0.1%, both succumbing to losses following an even steeper fall in the previous trading session. This marked the S&P 500’s most severe two-day downturn since the regional banking crisis in March 2023.

In Asia, markets echoed the downturn with Hong Kong’s Hang Seng, South Korea’s Kospi, and Japan’s Topix each dropping over 2%. China’s CSI 300 wasn’t spared either, decreasing by 1.1%. According to Emmanuel Cau, a strategist at Barclays, these movements signal a broad awakening to the reality of fewer rate cuts by the Federal Reserve.