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By Barbara Kollmeyer, MarketWatch

DAX remains in the grip of a bear market

European stocks took a hard hit on Thursday, as investors in the region got their first chance to react to what many viewed as a disappointing policy decision by the Federal Reserve.

Banks and major oil companies were leading decliners.

How are the markets performing?

The Stoxx Europe 600 dropped 0.9% to 6,756.69, after finishing up 0.3% on Wednesday.

The German DAX (DAX) fell 1.1% to 10,647.50. The index is now down 21.6% from its 52-week high, and has been trading in bear-market territory for the last several sessions. A bear market is usually defined as a drop of at least 20% from a recent peak.

France's CAC 40 tumbled 1.7% to 4,697.06. The FTSE 100 saw the lightest losses, down just 0.3% to 6,746.92.

Dollar weakness in the wake of the Fed move boosted rivals, such as the euro , which rose to $1.1460, compared with $1.1379 in New York late on Wednesday. The pound climbed to $1.2682 from $1.2662.

What is driving markets?

The Fed was widely expected to increase the federal-funds rate (http://www.marketwatch.com/story/defying-trump-fed-hikes-interest-rates-by-a-quarter-point-2018-12-19), and while it penciled in fewer hikes for 2019--two compared with three before-- investors appeared to be seeking a more dovish move from the central bank. U.S. stocks, which had rallied in the run-up to the decision, sold off sharply, with stock futures indicating a potentially tough session for Wall Street on Thursday.

Europe, which closed before that Fed decision was announced, followed up on Thursday with losses of its own.

Elsewhere, the Bank of England on Thursday voted unanimously to keep lending rates on hold, citing concerns over global growth and Brexit risks. Data showed retail sales rose in November in the U.K., with a big lift coming from Black Friday online shopping (http://www.marketwatch.com/story/uk-retail-sales-lifted-by-black-friday-shopping-2018-12-20).

(http://www.marketwatch.com/story/uk-retail-sales-lifted-by-black-friday-shopping-2018-12-20)Airline stocks were in focus after London Gatwick Airport shut down (http://www.marketwatch.com/story/major-pharma-companies-plan-to-raise-drug-prices-in-january-report-2018-12-19) late Wednesday and that continued Thursday, amid reports that two drones were flying above the airfield led to a formal investigation.

What stocks are active?

Airline stocks were in focus after London Gatwick Airport shut dow (http://www.marketwatch.com/story/major-pharma-companies-plan-to-raise-drug-prices-in-january-report-2018-12-19)n late Wednesday, amid reports that two drones were flying above the airfield led to a formal investigation. Ryanair Holdings PLC (RYAAY) slid 2.6%(LHA.XE) all fell by 2%. Cruise line company Carnival PLC (CCL.LN) lost 5%.

Danish electronics company Bang & Olufsen A/S (BO.KO) was one of the biggest midcap fallers, with stocks dropping by 31%.

-- Barbara Kollmeyer contributed to this article

(END) Dow Jones Newswires

December 20, 2018 10:24 ET (15:24 GMT)

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