Investing.com – European equities traded lower on Monday as weak UK economic data raised fears of an economic slowdown across the region as central banks take action to fight sizzling inflation.
By 3:50 AM ET (0750 GMT), the DAX in Germany was trading down 1.4%, the CAC 40 in France was down 1.5% and the UK’s FTSE 100 was down 0.9%.
Data released on Monday morning showed the UK economy contracted in April, with the country’s GDP falling 0.3% as manufacturing, services and construction declined simultaneously for the first time since January 2021.
The slowdown came ahead of Thursday’s BoE meeting, where the central bank is expected to raise rates by 25 basis points for the fifth straight time since December, after domestic inflation reached a 4-year high of 9% in April.
Europe got a weak baton from Asia: Japan’s Nikkei, South Korea’s KOSPI and Hong Kong’s Hang Seng fell about 3% as investors digested the largest annual rise in the U.S. consumer price index (CPI) since December 1981, according to data published in last Friday.
This raised hopes that U.S. inflation had peaked and raised the chances that the Federal Reserve, which meets later this week, will continue to sharply tighten monetary policy after a 50 basis point rate hike, which was largely included in prices for June and July.
This follows the European Central Bank confirming late last week that it intends to raise its interest rate by 25 basis points in July and raise it again in September.
Adding to the market’s woes was Sunday’s news of a “ferocious” COVID-19 outbreak in Beijing’s most populous Chaoyang district.
In corporate news, Sanofi (EPA:SASY) (NASDAQ:SNY) shares fell 0.8% despite the French drug maker saying its vaccine, a “candidate” to fight COVID-19, which he co-developed with GSK (LON:GSK) showed in 2 trials the potential to protect against major virus strains of concern when used as a supplementary vaccination.
Oil prices tumbled on Monday as a surge in new COVID-19 cases in Beijing, China’s capital, dashed hopes for a rapid increase in oil demand from the world’s largest oil importer.
Also putting pressure on the price of crude oil is the prospect of further tightening of US monetary policy to combat rising inflation, which helps strengthen the dollar and could potentially cause a sharp slowdown in economic growth.
By 3:50 AM ET (0750 GMT), U.S. WTI crude futures traded 1.8% lower at $118.56 a barrel, while Brent crude fell 1.7% to $119. 95.
In addition, gold futures fell 0.8% to $1,859.95 an ounce, while EUR/USD shed 0.5% to hit 1.0463.
Written by Peter Nurse