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European stocks weaken as Thursday trading began as inflation worries and a potential global economic slowdown continue to loom.
European stocks fell back early Thursday as fears of rampant inflation continue to weigh heavy on global markets. Thursday’s decline follows the developments from the day before when European stocks in regional markets closed lower.
The pan-European Stoxx 600 dipped 1.6% during the early trading session, with retail stocks leading the losses with a 2.7% decline. Meanwhile, HomeServe climbed more than 11% to lead the Stoxx 600 by the size of individual share price movement. This upswing came after it agreed to an acquisition by Canada’s Brookfield Asset Management for $5 billion.
However, French care home operator Orpea is among those wallowing at the bottom of the Stoxx 600 after falling more than 7%. This setback came about following a French media report which alleged potential financial irregularities at Orpea’s Swiss unit.
European futures contracts also traded lower on Thursday, with the DAX futures in Germany trading 0.9% lower. In addition, the French CAC futures also dipped 0.8%, while the FTSE 100 futures contract in the UK declined 0.7%.
In addition, data from the UK recently showed that inflation in the region jumped to a 40-year high of 9% in April. This also impacted food and energy prices and drastically worsened the cost-of-living crisis in the UK. Furthermore, the European Union’s plan to ban Russian oil imports over a six-month timeline does not improve energy consumerism costs in its member states.
Currently, the proposed ban on Russian oil is facing some opposition. Some European Union member states that rely heavily on the product, including Hungary, are not in support of the ban.
Beyond European Stocks, Inflation Fears also Grip US
The inflation fears gripping the majority of European stocks also affects the US financial landscape. For instance, the Dow Jones Industrial Average (DJIA) was close to registering its biggest loss since 2020 on Wednesday. So far, the major US index has dropped more than 1,100 points or 3.6%. This plunge came about after leading retailers warned of rising cost pressures, further confirming investors’ worst inflation fears.
The Federal Reserve’s incessant disposition to hike interest rates to neutralize soaring prices has also sparked recession fears. Earlier this week, Fed Chair Jerome Powell also admitted that the central bank’s attempts to curb inflation could likely hurt the US economy. However, Powell also remained resolute regarding the Fed’s fiscal efforts to reduce inflation. The Fed Chair insisted that the organization will “keep pushing” to tighten monetary policy. He further stated that the US central bank will only ease off when inflation starts to decline.
Commenting on the US situation, Megan Horneman, chief investment officer at Verdence Capital Advisors, said:
“The consumer is challenged, we started to see at the end of the year that consumers were turning to credit cards to pay for the rise in food prices, rise in energy prices, and that’s actually gotten much worse.”
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