LONDON – European stocks fell on Thursday before the latest decision on interest rates by the European Central Bank.
The pan-European Stoxx 600 fell 0.7% at the start of trade, with basic resources falling 1.4% to lead to a loss as all sectors traded in negative territory except oil and gas, which rose 0%. 6%.
In terms of individual stock price movements, British supermarket chain Sainsbury’s fell more than 5% in early deals to the bottom of the Stoxx 600, while compatriot Tate & Lyle rose more than 4% after its earnings report for the whole year.
European markets are focused on the upcoming monetary policy meeting and the ECB’s decision on Thursday. The central bank is expected to confirm its intention to raise interest rates next month. The move comes after inflation in the 19-nation eurozone hit a new record in May.
Investors will watch ECB President Christine Lagarde’s press conference after the meeting to assess how aggressive the bank may be.
Asia-Pacific stocks were mixed in trading on Thursday, with investors watching the Chinese market’s reaction to May’s trade data for May, which exceeded expectations. US stock futures, meanwhile, withdrew in early trading on Thursday after key averages ended the regular session lower and US bond yields rose.
US investors continue to look for signs of slowing economic growth ahead of a reading of the consumer price index in May, which is scheduled for Friday. Data are expected to be slightly below April figures and could show that inflation has peaked.
The negative start of trading on Thursday continues a general downward trend for markets, as fears of inflation and growth continue to dampen investor sentiment.
“People are realizing that companies can certainly start passing on costs, and so price increases have generally been much higher than before, but their costs are rising and they are worried that costs will continue to rise.”
Randall Kroshner
Professor of Economics at the University of Chicago
Randall Krosner, a professor of economics at the University of Chicago and former Federal Reserve system manager, told CNBC on Thursday that inflation and rising employment costs are starting to create problems for corporations, leading to a recent “reassessment of stock markets.”
“People realize that companies can certainly start passing on costs, so price increases have generally been much higher than before, but their costs are rising and they are worried that costs will continue to rise because this will make it more difficult for them to continue to raise these prices. “I think that’s one of the reasons we’re seeing such downward stock pressure,” Crosener told CNBC’s Squawk Box Europe.
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