Inflation Fears are Hammering European Stocks
Eurozone will soon release inflation data; a higher-than-expected rise in German consumer prices fueled expectations of a swift reaction from the European Central Bank.
Investors are concerned about a sustained rise in energy costs after Europe pledged to cut most Russian oil imports in retaliation for Russia’s invasion of Ukraine. Annual inflation in the eurozone hit a record high of 7.7% in May; moreover, investors worry about a sustained rise in energy costs. By 0752 GMT, Germany’s DAX had down 0.7 percent. In contrast, the region’s STOXX 600 index had fallen 0.5 percent, with volatility soaring as U.S. markets reopened following a holiday.
Should You Expect a Rate Rise?
“Market players are speculating about a higher rate increase in July. If today’s (eurozone) inflation data surprises on the upside, such speculation is likely to be fueled even further “Analysts at Commerzbank (ETR: CBKG) said. Following the European Central Bank’s meeting next week, investors will be watching for any changes in the bank’s attitude. The central bank has indicated that it will begin raising interest rates in July. The rate should reach 0% or higher by September. Losses were driven by technology and real estate stocks, which both fell more than 1.5 percent.
Concerns over central bank tightening, the aftermath of the Russia-Ukraine crisis, and the impact of China’s severe COVID-19 limitations caused the STOXX 600 to conclude the month down; over 1%, marking its fourth month in the red this year. The FTSE 100 in London excelled with a 0.2 percent rise; it received a boost from a 6.8% leap in consumer goods major Unilever (NYSE: UL) following the appointment of activist investor Nelson Peltz to its board of directors. Crude prices jumped about 2% as the EU imposed a Russian oil embargo; boosting the index and limiting losses in broader Europe.
DSM, a Dutch speciality chemicals company, gained 8.4% after announcing plans to merge with Swiss rival Firmenich. DSM recently announced the sale of its engineering materials unit to private equity firm Advent International and German chemicals manufacturer Lanxess for 3.85 billion euros ($4.13 billion). Lanxess’ stock increased by 11%.
