European stocks hit new six-week low as inflation sets new high

Content of the article

European stocks fell on Wednesday as data showed euro zone inflation in August hit a new high, while energy concerns intensified after Russia began shutting down gas flows to the Germany via a key supply route.

The continent-wide STOXX 600 fell 0.8% to new six-week lows after trading higher at the open, extending losses to a fourth straight day. Energy stocks dragged losses as oil prices continued to fall on fears of recession.

Content of the article

The benchmark STOXX 600 index is on track for a 5% monthly loss on fears of hawkish central bank policies and escalating risks of recession and energy rationing in the region.

Content of the article

Eurozone inflation hit a new record high of 9.1% this month from 8.9% a month earlier, beating expectations and remaining well outside the Central Bank’s 2% target European Union (ECB). The Eurozone stock index fell 0.8% to near six-week lows.

“This is another stunning number, showing that consumers were feeling the pain even before Russia tightened its grip on its energy market,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.

“But what is particularly worrying is that core inflation has risen from 5.1% to 5.5%, adding to fears that an inflationary spiral is setting in.”

« These readings will fuel the fire of concerns that ECB policymakers will implement a sharp hike in September, despite the uncertainty ahead in terms of energy security. »

Content of the article

A Reuters report said on Friday that some ECB policymakers wanted to discuss a 75 basis point rate hike next month, even as recession risks loom as the inflation outlook deteriorates.

To add to recession-related concerns, Russia cut off gas supplies via the main European supply route Nord Stream 1, with the pipeline operator confirming that no gas was flowing on Wednesday morning.

Among individual stocks, Italian bank UniCredit rose 2.9% after it said the ECB had authorized a second share buyback installment worth up to 1 billion euros ($1 billion).

Dormakaba Holding fell 3.4% after the Swiss security group forecast organic growth slightly above its target range, but added that the outlook only applied to the first half of the 2022/23 financial year. due to growing macroeconomic challenges.

Italy’s Eni fell 4.1% after saying it would receive lower gas volumes from Russia’s Gazprom.

In a sign that investors were bracing for a period of higher inflation and interest rates, German borrowing costs were set to end August with their biggest monthly increase in more than 30 years.

(Reporting by Anisha Sircar in Bengaluru; Editing by Sherry Jacob-Phillips and Jane Merriman)