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Red-hot U.S. inflation hammers European shares amid recession fears

Saturday, June 11, 2022
Red-hot U.S. inflation hammers European shares amid recession fears © Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 9, 2022. REUTERS/Staff

By Susan Mathew

(Reuters) -European shares slumped 2.3% to hit three-week lows on Friday after U.S. inflation came in hotter than expected, raising the prospect of a recession as central banks try to put a lid on prices.

Losses on the pan-European STOXX 600 index were broad-based, led by a 4% slide in banks. The index extended declines to a fourth straight session, putting it on course for weekly losses of more than 3%.

Italy's MIB index sank 4.5% to three-month lows. Spain's IBEX gave up 3.3%, while other major bourses in the region lost more than 2% each.

Headline inflation for May in the United State came in at 8.6%, topping an expected 8.3%, suggesting that the Federal Reserve could continue with its 50 basis points interest rate hikes through September to combat inflation. The Fed's take on inflation at its meeting next week will be closely watched.

Equities were hammered on Thursday after the European Central Bank said it would deliver next month its first interest rate hike since 2011, and a potentially larger move in September.

"Markets are in a state of nervousness because the stickiness of inflation essentially forces the central banks to double down on their tightening," said Dhaval Joshi, chief strategist at BCA Research. "The most important question is whether central banks are going to take the economy into recession to conquer inflation."

"Then the sell-off will transform from a valuation sell-off to a profit sell-off."

Banks, already suffering from heavy losses in peripheral lenders such as those in Italy, accelerated losses on worries about widening spreads between bond yields in Italy and Germany.

"The second reason for banks is that if we're in a stagflation risk, then obviously banks will do badly because of the rising default rates, bad loans and bad debt provisioning," Joshi said.

Concerns also mounted about demand and growth in China, the world's second-largest economy, after Shanghai and Beijing imposed new COVID-19 lockdown restrictions.

Investors pulled out money from European equity funds in the week to Wednesday, marking the 17th consecutive week of outflows, due to uncertainties related to the Russia-Ukraine war, BofA said.

Among individual stocks, GSK rose 1.4% after the drugmaker said its vaccine for respiratory syncytial virus was successful in a late-stage trial involving older adults.

Regional airlines fell as labour strife in Europe drive expectations of more travel headaches during the busy summer season.

Ryanair, International Consolidated Airlines (OTC:ICAGY), Lufthansa and Wizz Air dropped between 2.1% and 3.1%.

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03-07-2022 00:47:19 (UTC+7)

EUR/USD

1.0429

-0.0053 (-0.51%)

Summary

Neutral

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (3)

Sell (4)

EUR/USD

1.0429

-0.0053 (-0.51%)

Summary

Neutral

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (3)

Sell (4)

GBP/USD

1.2098

-0.0076 (-0.63%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (6)

Sell (3)

USD/JPY

135.21

-0.52 (-0.39%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (7)

AUD/USD

0.6816

-0.0085 (-1.23%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (3)

Sell (5)

USD/CAD

1.2888

+0.0015 (+0.12%)

Summary

Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

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Sell (4)

EUR/JPY

140.98

-1.29 (-0.91%)

Summary

Neutral

Moving Avg:

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Sell (10)

Indicators:

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Sell (3)

EUR/CHF

1.0007

-0.0002 (-0.02%)

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↑ Sell

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Gold Futures

1,812.90

+5.60 (+0.31%)

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Silver Futures

19.823

-0.529 (-2.60%)

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Copper Futures

3.6138

-0.0962 (-2.59%)

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Neutral

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Crude Oil WTI Futures

108.46

+2.70 (+2.55%)

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Brent Oil Futures

111.48

+2.45 (+2.25%)

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5.620

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US Coffee C Futures

223.95

-6.15 (-2.67%)

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Euro Stoxx 50

3,448.31

-6.55 (-0.19%)

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↑ Buy

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S&P 500

3,825.33

+39.95 (+1.06%)

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DAX

12,813.03

+29.26 (+0.23%)

Summary

Buy

Moving Avg:

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FTSE 100

7,168.65

-0.63 (-0.01%)

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↑ Buy

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Hang Seng

21,859.79

-137.10 (-0.62%)

Summary

Sell

Moving Avg:

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Indicators:

Buy (3)

Sell (3)

US Small Cap 2000

1,727.76

+19.77 (+1.16%)

Summary

↑ Buy

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IBEX 35

8,176.10

+77.40 (+0.96%)

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Moving Avg:

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41.270

-0.255 (-0.61%)

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↑ Buy

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57.35

+0.63 (+1.11%)

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182.00

-0.12 (-0.07%)

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Adidas AG

167.64

-1.12 (-0.66%)

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Deutsche Lufthansa AG

5.566

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Summary

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Siemens AG Class N

96.00

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8.053

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Summary

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 EUR/USD1.0429Neutral
 GBP/USD1.2098↑ Buy
 USD/JPY135.21↑ Sell
 AUD/USD0.6816↑ Sell
 USD/CAD1.2888Buy
 EUR/JPY140.98Neutral
 EUR/CHF1.0007↑ Sell
 Gold1,812.90↑ Buy
 Silver19.823↑ Buy
 Copper3.6138Neutral
 Crude Oil WTI108.46↑ Sell
 Brent Oil111.48↑ Sell
 Natural Gas5.620↑ Sell
 US Coffee C223.95↑ Sell
 Euro Stoxx 503,448.31↑ Buy
 S&P 5003,825.33↑ Buy
 DAX12,813.03Buy
 FTSE 1007,168.65↑ Buy
 Hang Seng21,859.79Sell
 Small Cap 20001,727.76↑ Buy
 IBEX 358,176.10↑ Buy
 BASF41.270↑ Buy
 Bayer57.35↑ Buy
 Allianz182.00↑ Sell
 Adidas167.64↑ Sell
 Lufthansa5.566↑ Sell
 Siemens AG96.00↑ Buy
 Deutsche Bank AG8.053↑ Buy
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SJC Eximbank6,800/ 6,860
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Cập nhật lúc 18:49:42 02/07/2022
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