European stocks slipped on Thursday following the sell-off on Wall Street and in Asia, as global investors were spooked by the U.S. inflation data. The prices American consumers pay for goods and services accelerated at their fastest pace since 2008 in April, with the CPI spiking 4.2% from a year ago. In turn, higher-than-expected data sparked fears that the Federal Reserve could increase interest rates sooner rather than later despite the central bank has said previously that rising rates are temporary.
In general, it’s a rather empty calendar day in Europe today. Furthermore, markets in Denmark, Finland, Norway, Sweden and Switzerland were closed for a public holiday.
Elsewhere, China’s Premier Li Keqiang said that the economy had been stabilizing, but the vitality of market entities had not fully recovered. He also added that growing uncertainties over rising inflation and property prices, and tensions with the US, Australia and other nations that could affect grain and energy imports.
Meanwhile, the Bank of Spain said in an annual report that they see the economy rebound in the second half of 2021 though effects from COVID-19 will last for years. Spanish recovery relies on vaccination pace, implementation of EU recovery funds and reforms, the central bank highlighted.
Against this backdrop, the UK FTSE 100 sheds 2.07% to 6,859, Italy’s FTSE MIB loses 2.11% to 23,937, France’s CAC 40 is down by 1.26% to 6,200, while the German DAX 30 declines by 1.47% to 14,927. US stock index futures point to mixed open following yesterday’s plunge.
In currencies, the USD index continues to push higher, approaching the 91.00 level during the European hours as the safe-haven demand reemerged following some retreat in Asia. Meanwhile, yields of the US 10-year note trade closer to 1.70%. The dollar derived strong support from inflation figures and could retain a bullish tone in the short term as traders continue to digest the release. Of note, the greenback keeps rising despite FOMC’s Clarida talked down higher inflation deeming it as transitory. She also expressed his concerns over the uncertainty surrounding the labour market.
Nathan Lambert, Head of Global FX Analytical Department