Europe stocks down 1.3% after Fed’s Powell comments; BoE rate decision ahead

European markets had a steep fall Thursday morning, with sentiment remaining sour after U.S. Federal Reserve Chairman Jerome Powell forecast more rate hikes this year, saying that “the process of getting back down to 2% has a long way to go.”

The benchmark Stoxx 600 was down 1.33% at 8:30 a.m. London time, with all sectors in the red. Autos fell 1.96%, as banks declined 2.41%. The index has posted declines in all three sessions so far this week.

“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. 

Investors in the U.K. are focused on the Bank of England’s next monetary policy announcement. The central bank is expected to increase rates as inflation remains stubbornly high, though markets are divided on whether it will opt for 25 or 50 basis points.

The Swiss National Bank announced a 25 basis point rate rise, its fifth consecutive hike, Thursday morning. It takes its policy rate to 1.75%, the highest level since April 2002.

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.”

Asia-Pacific stocks had a mixed Thursday, while U.S. futures were lower following three days of losses.