FX.co ★ Record eurozone inflation triggers decline in European stocks

On Wednesday, European key stock indices declined dramatically. Market makers worried about the latest statistics on inflation in the euro area, which again hit an all-time high.

At the time of writing, the STOXX Europe 600 index of Europe's leading companies declined by 0.57% to 417.40 points.

Shares of Polish supermarket chain Dino Polska are the top losers among the STOXX Europe 600 index. They plunged by 4.3%.

Meanwhile, the French CAC 40 sank by 0.98%, the German DAX dropped by 0.91%, and the British FTSE 100 lost 1.14%.

Top gainers and losers

Shares of British-Swedish drugmaker AstraZeneca sank by 1.1%.

British oil and gas company British Petroleum's stocks gained 0.2% on the news that its main engineering networks may be repaired and put into operation as early as next Tuesday. If the preliminary scenario occurs, BP could begin restarting its largest refinery in the US Midwest.

The market capitalization of French aircraft manufacturing corporation Airbus Group SE fell by 1.9%. The day before, the management of the aerospace company announced that its chief financial officer Dominic Asam would resign his post in early 2023 to take the position of chief financial officer at German software giant SAP SE.

Shares of Danish Danske Bank AS rose by 0.4% on news that the company would cancel debts of 90,000 clients due to errors in its debt collection systems.

Shares of Italian luxury goods group Brunello Cucinelli SpA plummeted by 5.9% on weak statistics for January-June 2022 financial year.

Meanwhile, Belgian clothing retailer Ackermans & Van Haaren NV stocks soared by 5.8% after a strong report for the first 6 months of 2022.

Market sentiment

On Wednesday, European investors focused on the latest statistics of the EU countries. This morning, it became known that annual inflation in 19 countries of the euro area rose to a record 9.1% in August from 8.9% in July. Meanwhile, market experts predicted an increase in the index only to 9%.

Investors fear that peak inflation in the EU recorded in August will force the European Central Bank to sharply increase interest rates during its next meeting in September.

On Wednesday, stock market participants in the EU also analyzed data on Germany's labor market from the Federal Employment Agency. The data show that the unemployment rate in the country rose to 5.5% in August from 5.4% in July.

The number of unemployed in Germany rose by 28,000 to 2.497 million in August. The index has been rising for the third month in a row.

Meanwhile, analysts on average expected an increase in the number of unemployed by 28,500 and the rise in unemployment to 5.5%.

According to preliminary data from France's National Statistics Office Insee, consumer prices in the country were up 6.5% year-on-year in August. Thus, the rate of index increase declined from 6.8%in July (the peak since the early 1990s). At the same time, the market had forecast a weakening to only 6.7%.

The volume of France's GDP in April-June increased by 0.5% compared to January-March. Moreover, the final data of Insee coincided with the preliminary estimate.

In August, UK stores recorded the highest price increase since 2005, reflecting the jump in food costs triggered by the Russian-Ukrainian crisis. Thus, British companies' confidence collapsed to its lowest level since last March as local businesses worry about a record rise in inflation.

However, the main focus of traders will be on the monthly US employment report which is scheduled for release on Friday. Experts speculate that investors may react negatively to strong labor market data if it supports the basis for a continued sharp interest rate hike cycle.

Previous trading results

Last Tuesday, European stock indices fell following the decline of the key US exchanges. The previous day, market makers discussed the growing energy crisis, the prospects of interest rates growth by world central banks as well as the impending recession in the global economy.

Consequently, the STOXX Europe 600 index of Europe's leading companies fell by 0.67% to 419.81 points.

Yesterday, shares of Norwegian advertising and marketing company Adevinta ASA were the top gainers among the STOXX Europe 600. They jumped by 12.3%.

Shares of mining and energy companies Swedish Orron Energy AB and UK Centrica PLC topped the list of major losers. They added 9.7% and 6.6% respectively. The main reasons for the fall in quotes of these sectors was the decline in metal prices caused by the increasing number of coronavirus cases in China as well as investors' concerns about the demand for basic commodities.

Meanwhile, Germany's DAX gained 0.53%, France's CAC 40 lost 0.19%, and Britain's FTSE 100 closed trading down 0.88%.

On Tuesday, European investors focused on economic sentiment in the countries of the euro area.

According to preliminary data from the Spanish statistical office INE, consumer prices in the country grew by 10.4% year-on-year in August compared to an increase of 10.8% in July. At the same time, the index rose by 0.1% in monthly terms. Consumer prices in Spain fell by 0.6% in July compared to June.

This slowdown in inflation in the country analysts from INE attribute to a slowdown in energy prices.

Against this backdrop, the key Spanish index IBEX rose by 0.7% on Tuesday.

The day before, the UK Treasury Department said that China would stimulate demand and stabilize employment and prices in the second half of the year to optimize economic results amid weakening growth.

Notably, last week China's cabinet passed new economic support measures, including billions of dollars in policy funding.

News came that Chinese authorities were trying to stimulate their economy. It contrasted markedly with the monetary policy tightening in most countries around the world.