Europe: Stocks dip at open on inflation woes

EUROPEAN stock markets opened lower on Wednesday (Sep 14), extending a global selloff as higher-than-expected US inflation data sparked fears of a prolonged period of Federal Reserve interest rate hikes.

London’s benchmark FTSE 100 index dropped 0.7 per cent to 7,332.01 points, as investors also digested news that UK inflation slowed in August but held near a 40-year peak.

In the eurozone, Frankfurt’s DAX index fell 0.2 per cent to 13,163.07 points and the Paris CAC 40 shed 0.4 per cent to 6,224.13.

Asian equities swung lower, tracking Tuesday’s losses on Wall Street and in Europe.

“Investors are for the moment back to square one, as a hot US inflation print obliterated recent market gains,” said Interactive Investor analyst Richard Hunter.

“Whereas the recent market rally was predicated on an assumption that inflation had peaked, it remains more resilient than had been hoped, such that the Federal Reserve will have little option but to continue with its aggressive monetary policy.”

US government data showed Tuesday that the annual increase in CPI had slowed slightly in August to 8.3 per cent, but this was higher than forecast as food prices accelerated.

Added to the picture, UK inflation slowed last month to 9.9 per cent but remains close to a decades-high, official data showed Wednesday.

Global consumer prices have been soaring for months, exacerbated by Russia’s invasion of Ukraine, which has impacted energy and food costs, as well as ongoing supply chain snarls amid Covid lockdowns in China.

The world’s major central banks have in response ramped up interest rates in a bid to tackle runaway inflation – but this also dents economic activity as consumers and businesses face higher borrowing costs. AFP