London: European stocks fell on Wednesday, with traders plunging before major US inflation data in June. London’s stock market fell nearly 1% in almost half of the session, despite news of a recovery in UK economic growth in May. Eurozone equities fell about 1% after mixed closing prices in Asia. Concerned about the possibility of a recession in the euro area, the euro fell slightly the day after the dollar weakened for the first time in 20 years. Oil has rebounded slightly due to sluggish demand expectations on Tuesday.

Tenter hook

“The market is in Tenterhook ahead of US inflation data, which has a significant impact on the Fed’s rate hike plans,” said Han Tan, an analyst at Exhibition Markets. “The new 40-year highs could force the Fed to punch harder and faster in the fight against runaway consumer prices, with signs of unabated inflationary pressures.” With increasing evidence of red inflation in the United States, the Fed is afraid to continue to aggressively raise interest rates after raising borrowing costs by three-quarters of a percentage point last month.

Inflation in the United States soared to a 40-year high of 8.6% in May. Inflation is skyrocketing globally after the economy resumes from the pandemic blockade and as the Ukrainian war continues to raise energy prices. As a further sign of pressure around the world, central banks in New Zealand and South Korea each raised interest rates by 0.5 percentage points on Wednesday. It has surged the most in Seoul since 1999.

European gas crisis

The euro has surpassed $ 1 a day after reaching parity for the first time since late 2002, as the worsening energy crisis fueled expectations that the eurozone would be in recession. As Russia’s energy giant Gazprom begins 10-day maintenance on the Nord Stream 1 pipeline on Monday, blocks, especially gas-dependent Germany, are nervously waiting for the faucet to turn on again. In contrast to monetary policy elsewhere, the single currency has also been hit by the European Central Bank’s reluctance to raise interest rates.

“Long-term cuts in gas supply will stop many economic activities and put (Germany) in recession,” said Tapas Strickland of the National Australia Bank. He said July 21st, when the gas needs to be turned on again, will be an important day. “It happens to be the day of the next ECB meeting,” Strickland added. “One of these events is an important risk event. If Russia is doing gas politics by not turning on gas supplies, the euro could be much lower.”

German investor morale

Meanwhile, German investor confidence fell in July, according to a carefully watched survey on Tuesday. The industry was concerned about the potential impact of Russia’s gas outage on Europe’s largest economy. The ZEW Institute’s Economic Expectation Index fell 25.8 points to minus 53.8 points, the lowest level since 2011.

For that investigation, ZEW will quiz experts on the current economic situation and outlook for the next six months. Negative readings mean that most professionals are pessimistic. ZEW said in a statement that the July measurements were “slightly lower” than those seen in March 2020, when the coronavirus pandemic began.

Concerns surrounding Germany’s energy supply, the imminent rise in European Central Bank interest rates, and continued coronavirus-related regulations in key markets in China have contributed to a “significant deterioration in the economic outlook,” ZEW’s Achim Wambach said. Governor Back said. The morale of export-oriented, energy-intensive industries has declined “especially sharply,” Wambach said.

On Monday, Russian energy giant Gazprom stopped supplying Germany via the NordStream1 pipeline as it began maintenance work on the link. However, in Europe’s largest economy, there is widespread concern that pipelines will not return online after service periods, threatening Germany with a lack of winter. Authorities are already preparing for the possibility of supply distribution, and a long-term closure will have a major impact on the industry. Investors’ assessments of the current economic situation also fell 18.2 points to minus 45.8 points in July, according to the survey. – AFP

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