Europe close: Stocks fall as US inflation data continues to dent sentiment
European stocks ended in the red on Wednesday as a hotter-than-expected US inflation print a day earlier continued to rattle markets.
The benchmark Stoxx 600 index closed down 0.9% at 417.51, while France’s CAC 40 ended 0.4% lower at 6,222.41 and Germany’s DAX slid 1.2% to 13,028.00.
Figures released on Tuesday by the Labor Department showed that inflation eased to 8.3% on the year in August from 8.5% in July, but came in above consensus forecasts of 8.1%. The data fuelled expectations of another big rate hike from the Federal Reserve.
Oanda market analyst Craig Erlam said: "Markets are now fully pricing in at least a 75 basis point rate hike next week and almost a 40% chance of it being 100, a far cry from the 50 investors were hoping to see following that CPI data.
"Not only that, the policy rate is expected to peak at 4.25-4.5% early next year and if the data doesn't improve soon, that will increase further. Despite the economy's resilience to this point, a recession may still be on the cards as the tightening cycle potentially pushes it over the edge."
Closer to home, the European Union announced plans earlier to raise €140bn by capping revenues for non-gas energy suppliers as it looks to tackle the cost-of-living crisis. The EU also proposed a temporary levy on fossil-fuel producers.
Speaking in Brussels, European Commission president Ursula von der Leyen said: "In these times it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of our consumers. In these times, profits must be shared and channelled to those who need it most."
The EU chief added: "Millions of Europeans need support to pay their energy bills. Some companies produce electricity at low cost and make great margins."
She proposed a cap on their revenues that will raise more than €140bn for member states to "cushion the blow directly".
In equity markets, miners were among the biggest losers, with the Stoxx 600 basic resources index ending down 2.3% at 575.56.
In individual stocks, Zara owner Inditex rose just under 4% after it reported a rise in first-half sales and profits.
German warehouse equipment manufacturer Kion tumbled following a profit warning, while Uniper slid following reports the German government is looking at nationalising the utility company.