European stocks decline as inflation unnerves markets

On Tuesday, European stocks fell into negative territory amid nervousness about inflation, as the next data on inflation in the United States should be published at the end of the week.

 

The pan-European Stoxx 600 index fell 0.5% by late morning, and tech stocks lost 1.5%, leading the losses as almost all sectors and major exchanges went into the red. Shares of basic resources and the oil and gas sector showed slight growth.

 

International markets are preparing for the release of key data on the US this week, including the latest inflation data on Friday.

 

The May U.S. consumer price index is only slightly lower than April's, and some economists believe this could confirm that inflation has peaked.

 

The University of Michigan Consumer Sentiment Index, which will also be released on Friday, will be under the scrutiny of investors.

 

David Roche, a seasoned investor and president of the Independent Strategy, said on Tuesday that the stock market is in the process of "a very long, slow formation of the bottom of the stock market.

 

"We have to remember that inflation is not just the rate of change in prices, it is the price level, and we have had a huge increase in the price level, which, as we are all told, due to low productivity, will still work and undermine margins," Roche told Squawk Box Europe.

 

"So I think the rallies that you're going to see when the market forms the bottom are going to be pretty ephemeral and pretty fragile."

 

Shares in the Asia-Pacific region were mixed on Tuesday as the Reserve Bank of Australia announced a larger-than-expected 50 basis point interest rate hike.

 

U.S. stock futures fell Tuesday morning as Wall Street scrambled to find direction ahead of key inflation data on Friday.

 

On Tuesday, the reaction of the UK market against the background of political turbulence in the country was limited. On Monday night, British Prime Minister Boris Johnson endured a vote of confidence initiated by his own lawmakers amid growing discontent with his leadership.

 

On Monday, 211 Conservative Party lawmakers voted for the prime minister and 148 against. To win the vote, Johnson needed the support of a simple majority of 180 MPs, but the figure of 148 was worse than many expected.

 

It's also worse than the result of a similar vote faced by former leader Theresa May in 2018. She resigned as prime minister just six months later.

 

In Europe, it was a quiet day on the data and income front. German industrial orders fell more than expected in April, the third consecutive monthly decline as weak demand and additional uncertainty following Russia's invasion of Ukraine continued to weigh in.

 

There were few significant price movements for individual stocks on Tuesday. Swiss logistics company Interroll fell 6.6% to the lower end of the Stoxx 600 after Credit Suisse lowered its stock price target.