Stocks fall after investors are rattled by US inflation data

European shares fell on Wednesday as higher-than-expected US inflation data raised bets about more aggressive Federal Reserve policy action, and also put pressure on the European Central Bank (ECB) after the euro tumbled to parity with the dollar.

As the US currency rallied, the euro fell below $1 per dollar for the first time in almost two decades, putting the ECB in a bind. The central bank is expected to raise interest rates next week for the first time since 2011 to combat inflation running at a record high of 8.6 per cent.

Wall Street stocks also declined in early trading, then bounced off session lows as investors looked for signs that inflation had peaked amid a broad retreat in commodity prices.

Dublin

The Iseq index declined 2 per cent, echoing the downbeat sentiment across Europe. On a weak day for construction stocks, building materials group CRH fell almost 1.7 per cent to €33.98, while Ryanair also posed a drag on the market, ending 2.5 per cent lower at €11.54.

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Packaging group Smurfit Kappa closed down 1.9 per cent at €32.22, while Flutter Entertainment dropped 1.65 per cent to €89.58. The banks also slipped, with Bank of Ireland falling 1.1 per cent to €5.74 and AIB down 2.9 per cent at €2.06 on a day with few gainers.

London

The blue-chip FTSE 100 fell 0.7 per cent after hotter-than-expected US inflation data slammed global markets, while a surprise growth in Britain’s economy failed to assuage recession worries.

The mid-cap FTSE 250 index fell 0.8 per cent, however, with pub operator JD Wetherspoon sliding 8.3 per cent after it warned of losses this year due to higher labour and marketing costs.

Its shares dropped to their lowest price since March 2020, when coronavirus pandemic fears hammered markets. Peers Mitchells & Butlers and Marston’s declined 5.6 per cent and 3.2 per cent respectively.

Asset manager Abrdn fell 5 per cent after Barclays downgraded the stock to “underweight”.

Europe

The pan-European Stoxx 600 index ended 1 per cent lower after data showed US consumer prices surged 9.1 per cent last month, the largest annual increase in more than four decades amid stubbornly high costs for gasoline, food and rent. Automobiles, construction and materials were the biggest European sectoral losers, down 2.3 per cent and 1.8 per cent respectively.

The Stoxx 600 index and the euro-zone blue-chips index have fallen 15.4 per cent and 19.6 per cent in the year to date as investors fear aggressive policy tightening will squeeze growth.

Among individual stocks, Orion jumped 9.2 per cent on Wednesday as the Finnish drugmaker upgraded its full-year outlook after signing a collaboration deal with Merck. In Frankfurt, the Dax fell almost 1.2 per cent, while the Cac 40 declined 0.7 per cent in Paris.

US

Wall Street’s main indexes slid amid fears that the Federal Reserve might take a more aggressive stance on interest rate hikes, potentially tipping the economy into a recession, after data showed consumer price inflation rose to 9.1 per cent in June.

US Treasury yields jumped, while a well-known Wall Street fear gauge, the CBOE volatility index, edged higher after touching a one-week high earlier in the session.

Tesla rose almost 2 per cent, limiting losses in the S&P 500 and the Nasdaq, while chipmakers also gained ground. Twitter rose 5.1 per cent after Hindenburg Research said it had taken a significant long position in the social-media company. Shares of Delta Air Lines fell 6.1 per cent after the company’s second-quarter adjusted profit fell short of expectations.

JPMorgan Chase & Co and Morgan Stanley will be the first among big US banks to report quarterly results this week, kicking off the second-quarter reporting season in earnest. – Additional reporting: Reuters