European markets set to surge at the open as investors digest Fed decision

LONDON — European stocks are expected to open much higher on Thursday as investors in the region digest the U.S. Federal Reserve’s decision Wednesday to accelerate the reduction of its monthly bond purchases

The U.K.’s FTSE index is seen opening 61 points higher at 7,235, Germany’s DAX higher by 161 points at 15,651, France’s CAC 40 up 99 points at 7,028, Italy’s FTSE MIB 281 points higher at 26,974, according to data from IG.

Global investors will be digesting the U.S. central bank’s signal on Wednesday that it would be aggressive on tapering bond purchases and sees several rate hikes in 2022.

The Fed will begin reducing the pace of its asset purchases in January and buy just $60 billion of bonds each month going forward, compared to $90 billion in the month of December.

Projections released overnight indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and another two in 2024.

The decision to aggressively ease bond purchases follows recent inflation data showing a 6.8% surge in November, which was higher than expected and the fastest rate since 1982.

Asia-Pacific markets were mixed Thursday as investors digested the Fed’s indications that its run of ultra-easy monetary policy since the start of the pandemic is coming to a close.

Meanwhile, U.S. stock futures were slightly higher Wednesday evening after the decision. More U.S. economic data is due out Thursday, including housing starts and jobless claims at 8:30 a.m. EST.

There’s more central bank activity on Thursday with the Bank of England set to release its latest monetary policy decision. U.K. inflation climbed to a 10-year high in November, data showed Wednesday, and could influence the bank on whether to tighten monetary policy.

Also in focus for European markets are flash purchasing manager’s index (PMI) data from across the euro zone and U.K. for December. The data will likely reflect the imposition of Covid restrictions and partial lockdowns in some countries, such as Germany and the Netherlands, respectively.

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— CNBC’s Tanaya Macheel and Saheli Roy Choudhury contributed to this report.

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