European stock markets drop off radar with German inflation

European stock markets fell for a second session in a row today, ending lower in a more cautious environment as high inflation and high interest rates persist. The highlight was the release of Germany’s Consumer Price Index (CPI), which showed an increase relative to the previous month.

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This week, investors are still waiting for the index release for the Eurozone. Also, at the end of the session, mining giant BHP announced it was withdrawing its bid to buy Anglo American after a series of offers were rejected by the rival.

The pan-European STOXX 600 index ended down 1.06% at 513.57 points. Germany’s annual CPI rate increased to 2.4% in May from 2.2% in April. The result was in line with the expectations of analysts polled by FactSet.

The rise in the index for the first time in nearly a year was mainly driven by relative base effects – but even without them, inflation would not have fallen for a second month in a row. The assessment comes from Commerzbank, citing growing signs that the country’s deflationary trend is now over. The bank highlighted a continued strong upward trend in service prices, “driven by significantly higher wage costs in the coming months”. “We expect the core inflation rate to remain stable in the coming months, close to its current level of 3.0%, and therefore above the European Central Bank’s (ECB) target of 2%,” he said.

The GfK German Consumer Confidence Index came in higher than expected, forecasting a rise of -20.9 points in June. In Frankfurt, the DAX fell 1.09% to 18,474.88 points. In Paris, the CAC 40 fell 1.52% to 7,935.03 points. In Milan, the FTSE MIB fell 1.47% to 34,150.54 points. In Madrid, the Ibex35 fell 1.11% to 11,150.60 points. In Lisbon, the PSI 20 fell 1.62% to 6,798.09 points.

Yesterday, in the US, Minneapolis Federal Reserve (Fed) President Neel Kashkari hinted that US interest rates will remain at their current high levels for a long time. “Concerns about the sustainability of high interest rates are keeping investors cautious. The FTSE 100 continued to open lower on inflation and the UK general election campaign continues to create economic and business uncertainty,” says Susannah Streeter, head of markets at Hargreaves Lansdown. In London, the FTSE 100 was down 0.85 points at 8,183.70. In the city, miner BHP advanced 0.77%, while Anglo American fell 3.05%.

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