European stocks fell more than 1% ahead of US inflation data

European stocks fell more than 1% ahead of US inflation data

On Friday, European stocks fell for a fourth day as market investors awaited May inflation data from the United States, which could influence the Federal Reserve’s policy decision next week. All sectors were trading in the red, with banks having the most impact on the pan-European STOXX 600 index, which dropped 1.3 percent. The index was on track to finish the week down around 2.5 percent, its biggest drop since early May.

The data is due at 1230 GMT, and bets have grown that the Fed will increase beyond the two 50-basis point hikes it plans for next week and July. “Consensus estimates for U.S. CPI release, with risks skewed to the upside, have raised worries about the Federal Reserve’s ability to bring inflation under control while avoiding a recession,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Concerns also mounted about demand and growth in China, the world’s second-largest economy, after Shanghai and Beijing went back on fresh COVID-19 alerts on Thursday and imposed new lockdown restrictions. The U.S. Labor Department’s Consumer Price Index was expected to have accelerated to 0.7% last month from 0.3% in April. But when stripped of volatile food and energy products, it was seen to cool a nominal 0.1 percentage point to 0.5%.

Equities were hammered on Thursday after the European Central Bank said it would deliver next month its first interest rate hike since 2011, and a potentially larger move in September. Investors pulled out money from European equity funds in the week to Wednesday, marking the 17th consecutive week of outflows, due to uncertainties related to the Russia-Ukraine war, BofA said.

Ryanair, International Consolidated Airlines, Lufthansa and Wizz Air dropped between 1.2% and 3.6%. Credit Suisse fell another 4.5% after State Street Corp said it was not looking to buy the Swiss bank. A report of a deal between the two lenders had sent Credit Suisse shares surging from near 20-year lows earlier this week.

Among individual stocks, GSK rose 1.4% after the drugmaker said its vaccine for respiratory syncytial virus was successful in a late-stage trial involving older adults. Regional airlines fell as carriers and airports clamored to find more workers, minimize canceled flights and reduce delays for passengers amid labor strife in Europe driving expectations of more travel headaches during the busy summer season.

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