European Stocks Drop Ahead of US Consumer Price Report
On Friday, European stocks continued to decline as investors looked ahead to US inflation data and tried to process the European Central Bank’s latest policy meeting, CNBC reported.
Yesterday, the ECB announced it would increase interest rates by 25 basis points. Another hike is expected in September. Its scale depends on the medium-term inflation outlook.
Banks lead Stoxx losses
The Stoxx 600 lost 1.5% this morning. Banks lead declines with a drop of 3%. At the bottom of the index was the Italian Banco BPM, down 8.5%, spearheading a drop for Europe’s banking sector.
After rumors that Credit Suisse was being taken over were dispelled, the struggling Swiss lender lost 3.5%.
Euro zone growth forecasts downgraded
The ECB downgraded euro zone growth forecasts and increased inflation expectations. Within hours of the decision, European stocks fell sharply, continuing their descent at the time of writing.
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US consumer price index expected any minute now
The US consumer price index will be read out at 13:30 London time today. If it shows slower growth or matches expectations, Wall Street may conclude that inflation has reached a peak and that the Central Bank can afford to be less aggressive in tightening monetary policy throughout 2022.
Stocks declined dramatically during yesterday’s regular session. In premarket trade today, US stock futures were level in anticipation of the consumer price report.
Asian markets mixed, China inflation unsurprising
China’s May inflation data corresponded to expectations, and shares in Asia-Pacific were mixed today.
Central Bank of Russia brings interest back to pre-war levels
Russia’s central bank brought the key interest rate back to its level before the war on Ukraine, cutting it by 150 basis points to 9.5%. The board of the central bank acknowledged that the economic environment remains “challenging and significantly restrains economic activity”, but added:
Inflation is slowing faster and the decline in economic activity is of a smaller magnitude than expected in April.
Britain’s banks are “not too big to fail”
The Bank of England announced today that Britain’s banking and financial services corporations are no longer “too big to fail.” An effort to rescue lenders similar to that back in 2007-09 might be needed soon.