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European Markets Move Lower as Key U.S. Inflation Data Looms

Published 10/08/2022, 05:56 pm
© Reuters

By Scott Kanowsky

Investing.com -- European stock markets edged down at the open on Wednesday ahead of the release of new U.S. inflation data that may provide clues to the Federal Reserve's plans to tighten monetary policy.

At 03:35 AM EST (0735 GMT), the pan-European STOXX 600 dropped by 0.11%. The CAC 40 in France decreased by 0.08%, and the FTSE 100 contract in the U.K. fell 0.11%. The outlier was the DAX in Germany, which traded 0.15% higher.

Global stock indices have been on tenterhooks this week ahead of the latest U.S. consumer inflation report, looking for signs that prices are close to peaking, providing the Fed with a reason to relent in its aggressive campaign to tame the highest inflation in decades.

U.S. CPI is due at 08:30 AM ET (1230 GMT), and is expected to come in at 8.7% for July, down slightly from the 9.1% seen in the prior month. While such a dip could indicate that inflation has peaked, it would still remain near its highest level in forty years.

The Fed has indicated that several monthly declines in CPI growth would be needed before it lets up on the aggressive monetary policy tightening, so a dramatic fall would be needed to substantially change the narrative.

Data earlier Wednesday showed China’s consumer price and producer price indexes grew at a slower-than-expected rate in July, showing that the country was still grappling with damaging COVID-19 lockdowns.

Meanwhile, German CPI rose 0.9% on the month in July, falling only marginally to 7.5% on the year, showing that price pressures remained strong in Europe’s largest economy.

In corporate news, E.ON SE (ETR:EONGn) cut the value of its stake in the Nord Stream 1 gas pipeline by around €700 million, citing "heightened uncertainty" over the impact of Russia's war on Ukraine. Shares in Europe's largest operator of energy networks slumped towards the bottom of the STOXX 600 in early deals.

Tui AG NA (ETR:TUIGn) shares also fell after the holiday group reported a third-quarter operating loss as air traffic disruptions in Europe led to an uptick in costs. But the company said it expects bookings this summer to near pre-pandemic levels.

Prudential PLC (LON:PRU) posted a rise of 8% in its first-half operating profit, but the Asia-focused insurer warned of challenging conditions for the rest of the year as COVID curbs persist in some markets. Shares in the company dropped into the red.

Oil prices eased lower after industry data showed a surprise rise in U.S. crude stocks, hinting at slowing demand at the world’s largest consumer.

Data from the American Petroleum Institute, released late Tuesday, indicated that U.S. crude inventories rose by about 2.2 million barrels last week, compared with a forecast of a rise of less than 100,000 barrels.

Official government data is due later Wednesday, and a similar figure would mark a second straight week of unexpectedly large U.S. oil stocks.

By 03:20 AM EST (0720 GMT), U.S. crude futures traded 0.86% lower at $89.72 a barrel, while the Brent contract fell 0.6% to $95.73 a barrel.

Additionally, gold futures fell 0.30% to $1,806.85/oz, while EUR/USD changed hands at $1.0210.

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