European markets open higher after Fed hike as US dollar hits seven-week high

European markets opened higher on Thursday following the Federal Reserve's rate hike, with major indexes trading above their previous close of 0.6%. France's CAC 40, Germany's DAX 30, Italy's FTSE MIB, Spain's IBEX 35, the Netherlands AEX, and Switzerland's CH20 all rose between 0.2% and 0.7%. The UK's FTSE 100 led the pack, gaining more than 1%.

Carmakers and industrials powered the Paris index, with Renault jumping over 2%, Stellantis climbing 1.6%, and Schneider Electric surging 1.3%. In contrast, Dassault Systèmes fell 2.4% as technology stocks faced pressure. The relative calm followed a volatile session in New York, where the Dow Jones Industrial Average declined 1.2% and the S&P 500 dropped 0.4%, while the Nasdaq remained flat.

Asian markets were mixed overnight, with Tokyo's Nikkei 225 up 0.2%, Seoul's Kospi up 0.9%, Hong Kong's Hang Seng down 0.7%, and the Shanghai Composite declining 0.4%. Analysts had expected the rate hike to align with market forecasts, though the Iran war is likely to keep inflation pressure high.

The most significant impacts were seen in currencies and bonds. The US dollar surged to its highest level in seven weeks against a basket of major currencies, driven by rising short-dated Treasury yields following the Fed's decision. The euro dropped around 0.5% to $1.146, while the 10-year Treasury yield hovered near 5%, reflecting both energy shock from the war and concerns about U.S. government debt.

Investors are now anticipating another rate hike by December, with Goldman Sachs becoming the first major Wall Street bank to forecast consecutive hikes, reversing its prior belief that this month's move would be the only one. The Bank of England is set to announce its decision later Thursday and is expected to maintain rates, while the Bank of Japan is anticipated to hike rates on Friday.