European Stocks Close Lower as Hot U.S. Inflation Data Rattles Global Markets; Siemens Down 2.5%

Shannon Stapleton | Reuters
  • The U.S. inflation reading has sparked concerns that a path of aggressive rate hiking lies ahead.
  • Analysts are mixed on whether the data suggests inflation has hit a peak.
  • In Europe, earnings came from Allianz, Commerzbank and Siemens, among others.

LONDON — European stocks fell on Thursday as investors remained concerned about slowing growth, interest rate hikes and inflation data from the U.S.

The pan-European Stoxx 600 index closed down by 0.6%, paring sharp losses at the open. Basic resources dropped 3% as almost all sectors and major bourses finished in negative territory.

Global investors digested the April inflation reading from the U.S., which showed the consumer price index surged 8.3% in April as compared with a year ago. The inflation rate was higher than expected and still running close to a 40-year high of 8.5%. The reading has sparked concerns that a path of aggressive rate hiking lies ahead.

The April reading, which represented a slight ease from March's peak, was also above the Dow Jones estimate for a 8.1% gain. Markets in Asia-Pacific closed lower Thursday, while stocks stateside were mixed Friday.

Economists are weighing data indicating a slowdown in growth alongside surging inflation, prompting fears of "stagflation" and a possible recession. Central banks face the unenviable task of tightening policy to rein in inflation while trying to avoid exacerbating downside risks to growth.

The U.K. economy shrank by 0.1% in March but expanded by 0.8% for the first quarter of 2022 as a whole, official figures showed on Thursday, missing consensus forecasts and signaling that the worst is yet to come as the country's escalating cost-of-living crisis bites.

"Monetary policy in the current environment is very challenged and that's against the background of rising commodity prices, and consequently, I think the onus now has to be on an easing fiscal policy to try and reduce recession risk," Bob Parker, investment committee member at Quilvest Wealth Management, told CNBC on Thursday.

In Europe, earnings came from Veolia, Bouygues, Aegon, Allianz, Commerzbank, RWE, Siemens and Zurich Insurance.

In terms of individual share price movement, BMW shares slid more than 8% as they traded ex-dividend. Siemens shares dropped 2.5% after the German giant's net income halved to 1.21 billion euros ($1.27 billion) in the first quarter as it suffered a 600 million euro hit from charges and impairments associated with Russia.

At the bottom of the Stoxx 600, German copper producer Aurubis fell almost 9%.

Telefonica shares gained more than 2.6% after the Spanish telecoms company beat first-quarter profit forecasts.

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