By Peter Nurse 

- European stock markets traded sharply lower Thursday, extending the global selloff after minutes from the Federal Reserve’s December meeting pointed to early interest rate hikes amid inflation concerns. 

At 3:40 AM ET (0840 GMT), the DAX in Germany traded 1.5% lower, the CAC 40 in France dropped 1.7% and the U.K.’s FTSE 100 fell 1%. 

European indexes, like their Asian counterparts, took their lead from the sharp selloff on Wall Street late Wednesday, with the tech-heavy Nasdaq Composite plunging more than 3% in its biggest one-day percentage drop since February. The broad-based S&P 500 also fell almost 2%, its biggest daily percentage decline since late November.

These losses followed the publication of minutes from the latest Federal Reserve meeting, in which the policymakers said a "very tight" job market and elevated inflation might require the central bank to raise rates sooner than previously guided. Some policymakers also pressed for the Fed to start unwinding its massive bond purchases, something that would put further upward pressure on long-term interest rates.

Adding to Thursday’s woes, France reported a new record of Covid-19 cases, around a third of a million daily cases, while the likes of Portugal, Turkey, Italy and the Netherlands also registered record rises. Italy has announced a vaccination mandate for all those over 50 years old.

There was some good news though as German factory orders rose 3.7% month-on-month in November, driven by a sharp rise in demand from abroad, after declining a revised 5.8% in the previous month. 

In corporate news, Sodexo (PA:EXHO) stock fell 1.3%, weighed by the overall weakness despite the French catering and food services group reporting a 17% jump in its first-quarter organic sales that was helped by the reopening of schools and universities.

Next (LON:NXT) stock fell 2.3% even after the British clothing retailer raised its full-year profit outlook for the fifth time in 10 months on the back of strong sales in the run-up to Christmas.

Greggs (LON:GRG) stock fell 2.2% after the British bakery chain reported continued disruption to staffing and supply chains in the quarter, and said conditions in the first few months of 2022 were likely to remain challenging. 

Oil prices fell Thursday after U.S. gasoline stockpiles surged last week, implying weakening demand at the world’s largest energy consumer.

Data from the U.S. Energy Information Administration showed U.S. crude inventories fell by just over 2 million barrels for the week ended Dec. 31, less than expected, while gasoline inventories surged more than 10 million barrels, the biggest weekly build since April 2020.

The rise in gasoline stocks suggested that the public is reluctant to travel, with the United States reporting nearly 1 million Covid-19 cases on Monday, setting a global record.

By 3:40 AM ET, U.S. crude futures traded 0.5% lower at $77.47 a barrel, while the Brent contract fell 0.4% to $80.48. Both contracts had climbed to their highest levels since late November on Wednesday after a group of top producers increased output, suggesting confidence over demand in the first quarter.

Additionally, gold futures fell 1.5% to $1,798.40/oz, while EUR/USD traded 0.1% lower at 1.1300.