European stocks ahead of US inflation data -Dlight News

European stocks ahead of US inflation data

European stocks followed Asian markets lower on Wednesday as traders nervously awaited closely watched US inflation data, with the stronger-than-expected figure increasing pressure on the Federal Reserve to continue raising interest rates.

The region-wide Stoxx 600 was down 0.2 percent and Germany’s Dax was down 0.3 percent, while London’s FTSE 100 was down 0.1 percent. In Asia, Hong Kong’s Hang Seng index fell 0.6 percent and China’s CSI 300 fell 0.8 percent.

The decline came ahead of the latest inflation report from the US Bureau of Labor Statistics, which showed the consumer price index rose 0.4 percent on the month in April, up from 0.1 percent in March. Annual growth is expected to hold steady at 5 percent after nine straight months of decline since peaking last June.

Wary of stubbornly high inflation and trouble in the regional banking sector, the Federal Reserve last week raised its benchmark interest rate by a quarter of a percentage point to a new target range of 5 percent to 5.25 percent, the mid- to high-end. 2007.

US futures traded slightly higher after a down day on Wall Street in the previous session. Contracts tracking the benchmark S&P 500 and the tech-heavy Nasdaq 100 rose 0.2 percent and 0.1 percent from the New York open.

Although Wednesday’s CPI will be the main event, traders are also keeping an eye on political negotiations over the US debt ceiling. President Joe Biden yesterday urged Republicans to “take the threat of default off the table” after meetings with congressional leaders failed to reach a breakthrough.

“The debt ceiling issue is very serious but the markets are not reacting yet, and I still feel stressed,” said Mike Zygmont, head of trading at Harvest Volatility Management. “If political uncertainty gets too bad, markets will panic. If US is indeed the default, see below.

Francesco Paysole, FX strategist at ING, said there is now “growing concern that it will take a market sell-off in equities or money markets to really break the deadlock”.

In Asia, China’s import volume contracted by the most in a year last month, while exports expanded slower than expected, raising concerns over the pace of the country’s economic recovery after Beijing scrapped strict zero-covid measures until the end of 2022.

“The slowdown in Chinese exports may still have some way to go before it bottoms out later this year,” said Zhichun Huang, China economist at Capital Economics.

“Higher interest rates in advanced economies are still having an impact, and the turmoil in the global banking system has tightened credit conditions, which will weigh on economic activity.”

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