European stock markets opened lower – Inflation makes the markets nervous


European stock markets opened to a decline on Wednesday, when, for example, Frankfurt’s DAX had fallen -0.2 percent after a few minutes of trading and London’s FTSE 100 had fallen -0.4 percent.

The broad Stoxx Europe 600 index went down by -0.5 percent, particularly weighed down by the energy and information technology sectors. The defensive health care sector fell the least, about 0.1 percent.

The mood in the market has been nervous after the August inflation figures published yesterday in the United States were higher than expected.

As a result, the Nasdaq plunged by more than five percent yesterday, Tuesday, and the S&P 500 fell by more than four percent. $1.5 billion evaporated from the S&P 500 index in one day.

Inflation in the US fell from 8.5% in July to 8.3% in August, while expectations were for 8.1% inflation. At the same time, core inflation adjusted for energy and food prices rose to 6.3 percent from 5.9 percent in July, also exceeding economists’ forecasts.

The fall in inflation has been attributed mainly to lower energy and fuel prices, but the rise in core inflation indicates that inflation is moving more and more to other parts of the economy.

Investors fight the Fed

Persistently high inflation has increased market expectations for interest rate hikes by central banks, which inoculates stock valuation levels.

At next week’s meeting, the Fed is expected to raise its key interest rate by 75 basis points almost certainly, and even a 100 basis point increase has begun to be priced in as a small probability.

“Markets have been desperately bullish and tried to fight the Fed, which is very dangerous right now,” said BMO Family Officen Deputy Chief Investment Officer Carol Schleif Bloomberg’s on a television channel.

The US stock markets saw a rising streak of several days before the August inflation figures, even though the Fed has been known to raise its interest rates at a fast pace.

Interest rate expectations for the ECB have also been on the rise due to its accelerated pace of monetary policy tightening after raising key interest rates by a one-time jump of 75 basis points.

The fall of Wall Street already caught European stocks last night, when many stock exchanges fell by a couple of percent. The inflationary shock seems to have been partly priced in yesterday. Similar declines were also seen on Asian stock exchanges today.

US stock futures have pointed to a bullish opening today as investors seek to take advantage of yesterday’s collapse.

Inflation is also raging in Europe

The inflation situation in Europe does not look much better than in the United States. In Finland, Statistics Finland reported that inflation fell to 7.6 percent in August from 7.8 percent in July. However, experts have estimated that core inflation has also risen in Finland.

Regarding the euro area, Statistics Finland said that inflation was up to 9.1 percent in light of August’s preliminary data.

On the opposite shore of the Gulf of Bothnia, there was a shock when Swedish inflation was said to have risen from 8.5 percent in July to as much as 9.8 percent in August. Economists predicted inflation of 9.6 percent.

In Britain, inflation remained high at 9.9 percent, after being 10.1 percent in July, when inflation was expected to be 10.0 percent.

The industrial production of the euro area, which will be published today, is expected to have decreased by 1.1 percent in July from June and was approximately at the level of last year’s comparison period.

In the United States, the producer price index for August is published today. Producer prices are expected to have dropped sharply to 8.8% from 9.8% in July.


Source: Arvopaperi by www.arvopaperi.fi.

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