By Peter Nurse
Investing.com - European stock markets traded lower Monday, with weak UK growth data raising fears of an economic slowdown in the region just as central banks move to address red-hot inflation.
By 3:50 AM ET (0750 GMT), the DAX in Germany traded 1.4% lower, the CAC 40 in France fell 1.5%, and the UK’s FTSE 100 dropped 0.9%.
Data released earlier Monday showed that the UK economy contracted in April, with gross domestic product falling by 0.3% as the manufacturing, services, and construction sectors all declined simultaneously for the first time since January 2021.
This slowdown in growth comes ahead of Thursday’s Bank of England policy-setting meeting at which the central bank is widely expected to deliver what will be its fifth consecutive 25 bps rate hike since December after UK inflation hit a four-year high of 9% in April.
Europe had already received a weak handover from Asia, with Japan’s Nikkei, South Korea’s KOSPI and the Hang Seng in Hong Kong all falling around 3%, as investors digested the largest year-on-year increase in the US consumer price index since December 1981, data showed on Friday.
This hit hopes that US inflation had peaked and raised the chances that the Federal Reserve, which meets later in the week, will continue its aggressive monetary tightening past the 50 basis point hikes already largely priced in for June and July.
This follows the European Central Bank confirming late last week that it intends to hike interest rates by 25 basis points in July, with another rate increase also expected in September.
Adding to the market’s woes was Sunday’s news of a “ferocious” COVID-19 outbreak in Beijing's most populous district of Chaoyang.
In corporate news, Sanofi (NASDAQ:SNY) stock fell 0.8% despite the French drugmaker saying the COVID-19 vaccine candidate it has developed jointly with GSK (LON:GSK) in two trials showed a potential to protect against the virus's main variants of concern when used as a booster jab.
Oil prices slipped Monday as a burst of new COVID-19 cases in Beijing, China’s capital city, thwarted hopes of a rapid increase in demand from the world’s largest crude importer.
Also weighing on the price of crude is the prospect of further US monetary tightening to combat surging inflation, boosting the dollar and potentially causing a sharp economic slowdown.
By 3:50 AM ET, US crude futures traded 1.8% lower at $118.56 a barrel, while the Brent contract fell 1.7% to $119.95.
Additionally, gold futures fell 0.8% to $1,859.95/oz, while EUR/USD traded 0.5% lower at 1.0463.