European Stocks Edge Lower; Soaring U.K. Inflation Weighs

© Reuters.

By Peter Nurse

Investing.com - European stock markets edged lower Wednesday, struggling to maintain the week’s positive momentum as surging U.K. inflation raised concerns about interest rate rises and slowing growth.

By 4 AM ET (0800 GMT), the DAX in Germany traded 0.1% lower, the CAC 40 in France fell 0.1%, and the U.K.’s FTSE 100 dropped 0.1%.

Data out of the U.K. early Wednesday showed consumer inflation hitting a 40-year high, climbing 9.0% on the year in April, gaining 2.5% on the month, the biggest monthly increase since 1991.

These hefty gains were largely expected, as the cap on household electricity and gas prices was adjusted to reflect the sharp rise in wholesale prices caused by Russia's invasion of Ukraine, but suggest that the Bank of England will have to continue tightening monetary policy even though the risk of recession is mounting.

Deputy Governor Dave Ramsden said last week that the central bank will have to raise interest rates further to control surging prices, and there’s a risk that the U.K.’s worst inflation crisis in decades will take longer to ease fully.

Similar data from the Eurozone is due later in the session and is expected to show CPI at 7.5% in April, increasing the likelihood of the European Central Bank hiking rates by 25 basis points in the summer.

European Central Bank Governing Council member Klaas Knot, on Tuesday, became the first Eurozone official to suggest a possible half-point interest rate hike if inflation risks worsen, though he backs a smaller move for now.

In the corporate sector, ABN AMRO (AS:ABNd) stock fell 9% after the Dutch bank warned the war in Ukraine could have an impact on its business even though its first quarter net profit came in above market expectations.

Premier Foods (LON:PFD) stock rose 5.8% after the food manufacturer beat expectations for its annual profit and lifted dividends by 20%, saying it plans to raise prices to combat soaring costs.

Siemens Gamesa (BME:SGREN) stock rose 11% after Siemens Energy (ETR:ENR1n) confirmed it’s preparing a bid to buy the remaining third of the Spanish-listed wind turbine maker it does not already own.

Oil prices traded higher Wednesday on hopes that China is finally getting to grips with a prolonged COVID-19 outbreak, potentially increasing demand from the world’s largest importer of crude.

Shanghai, China’s main financial hub, achieved its milestone of three consecutive days with no new COVID-19 cases outside quarantine zones on Tuesday and laid out plans to end a more than six-week lockdown.

U.S. crude oil inventories unexpectedly fell by 2.4 million barrels for the week ended May 17, according to data from the industry body American Petroleum Institute.

Investors now await crude oil supply data from the U.S. Energy Information Administration, due later in the day, for confirmation.

By 4 AM ET, U.S. crude futures traded 1.6% higher at $111.39 a barrel, while the Brent contract rose 1.2% to $113.26.

Additionally, gold futures fell 0.3% to $1,814.15/oz, while EUR/USD traded 0.3% lower at 1.0515.