European Stocks Lower; German State Inflation Data Fails to Cheer By

© Reuters.

By Peter Nurse 

- European stock markets weakened Wednesday on US foreign exchange dealerconcerns about a potential economic slowdown on the back of soaring inflation ahead of a meeting of major central bank heads.

By 03:45 AM ET (0745 GMT), the DAX in Germany traded 1.1% lower, the CAC 40 in France fell 0.3%, and the UK’s FTSE 100 dropped 0.5%.

Sentiment in Europe is weak Wednesday following the overnight losses on Wall Street, after data showed U.S. consumer confidence dropped to a 16-month low in June on fears high inflation could cause the economy to slow significantly in the second half of the year.

Spanish inflation unexpectedly jumped 10% from a year ago in June, data showed Wednesday, a new 30-year high and up from 8.5% in May. 

The news was less depressing in Germany, as the state of North Rhine-Westphalia, Germany's largest state by population, said consumer prices fell by 0.1% on the month in June, bringing the annual rate of inflation down to 7.5% from 8.1%.

That was the first drop in the annual rate since January and fostered hopes that headline inflation may be peaking in Germany, having reached 7.9% on the year in May.

That said, the European Central Bank is committed to lifting interest rates in July, and also probably in September. With this in mind, the central bank’s annual retreat in Portugal will be in the spotlight, where President Christine Lagarde, along with Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey will appear at a panel discussion later Wednesday. 

Investors will be looking to see what these central bankers say about the trade-off between curbing inflation while still trying to ensure a soft-landing for the global economy.

Elsewhere, there was some positive news out of Asia after China announced an easing of its quarantine requirements for inbound passengers, in what could be seen as the biggest relaxation so far of its "zero COVID" strategy.

In corporate news, H&M (ST:HMb) stock rose 4.3% after the world’s second-largest clothing retailer reported a 33% year-on-year jump in second quarter pretax earnings, beating expectations.

Mulberry (LON:MUL) stock rose 3.2% after the U.K. fashion company, known for its luxury handbags, reported a strong post-COVID recovery, with sales and profits soaring.

Oil prices slipped lower Wednesday, handing back some of the gains seen over the last three sessions as traders await news out of Thursday’s OPEC+ meeting.

The Organization of Petroleum Exporting Countries and allies is widely expected to confirm another modest production increase scheduled for August, with limited room for a significant boost to output as very few members have the available space capacity.

The official crude inventory data from the U.S. Energy Information Administration last week will be published later in Wednesday’s session, along with last week’s numbers which were delayed due to a system issue.

By 03:50 AM ET, U.S. crude futures traded 0.3% lower at $111.47 a barrel, while the Brent contract fell 0.3% to $113.50.

Additionally, gold futures traded 0.2% lower at $1,818.50/oz, while EUR/USD traded 0.1% lower at 1.0512.

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