The mood was not good this Thursday for the European stock markets. Paris (-1.93%), Frankfurt (-1.82%), Milan (-1.52%) and London (-1.97%) fell on Thursday around 4 pm, erasing a large part of the previous day’s gains.
These figures follow the decline of the main Wall Street indices the day before: the Dow Jones index fell by 1.02%, the S&P-500 by 1.65% and the Nasdaq Composite, led by the decline of Apple (-5.2%), by 3.18%. US inflation figures are fueling concerns about the pace of Federal Reserve monetary tightening and its impact on the economy. While U.S. consumer price inflation slowed sharply in April due to lower gasoline prices, inflation continued to accelerate above economists’ expectations, suggesting that the slowdown is temporary. The “core CPI” index, which excludes energy and food, even accelerated with an increase of 0.6% over one month after +0.3% in March.
“The stronger-than-expected rise in inflation has reinforced concerns that the Fed needs to accelerate its monetary policy tightening,” commented Rodrigo Catril at National Australia Bank. The May data will be released five days before the Fed’s June meeting and a 75 basis point rate hike would become a “strong possibility” in the event of another nasty surprise, he added. In an environment made anxious by the continuing war in Ukraine, the confinements put in place in China, persistent inflation and fears of accelerating monetary tightening, market players fear a sharp economic slowdown, or even a recession for the most pessimistic among them.