European markets slump as the prospect of rate hikes clouds investor sentiment; Stoxx 600 down 1%

Key Points

• The region’s major bourses closed in negative territory last Friday, with the investor mood darkened by the European Central Bank’s confirmation, last Thursday, that it intends to hike interest rates by 25 basis points at its July meeting.
• On Friday, U.S. inflation data compounded the losses with the highly anticipated May consumer price index report coming in hotter than expected.

LONDON— European stocks tumbled on Monday as investor sentiment is dominated by the prospect of forthcoming interest rate hikes.

The pan-European Stoxx 600 fell 1% in early trade, with travel and leisure stocks shedding 2% to lead losses as all sectors and major bourses slid into negative territory.

The slump in sentiment in Europe on Monday comes after the region’s major bourses closed in negative territory last Friday, with the investor mood darkened by the European Central Bank’s confirmation, last Thursday, that it intends to hike interest rates by 25 basis points at its July meeting.

A further hike is expected in September, the scale of which will be determined by the medium-term inflation outlook.

The central bank also raised its inflation expectations for the euro zone significantly and downgraded its growth forecasts.

On Friday, U.S. inflation data compounded the losses with the highly anticipated May consumer price index report coming in hotter than expected, with U.S. headline inflation hitting 8.6% year on year, outstripping economist expectations and the previous month’s figure.

Overnight, shares in Asia tumbled on Monday, as major markets in the region saw sharp losses and the dollar-yen hovered around the 135 level. Meanwhile, U.S. stock futures fell in early premarket trade as Wall Street tries to recover from one of its worst weeks of 2022.

Source : CNBC