Europe Markets

European stocks close slightly lower as traders digest inflation data, Fed comments

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Key Points
  • Lackluster sentiment globally comes after new data showed U.S. inflation surging at its fastest pace in nearly 13 years in June.
  • U.K. inflation rose by more than expected in June, with the consumer price index growing 0.5% month-on-month versus a 0.2% consensus estimate.
  • Fed Chairman Jerome Powell said in prepared remarks that the central bank would not be altering its easy monetary policy for some time.

LONDON — European stocks inched lower Wednesday as traders reacted to hotter-than-expected U.S. and U.K. inflation figures and comments from Fed Chairman Jerome Powell.

The pan-European Stoxx 600 provisionally closed about 0.1% below the flatline, with travel and leisure stocks dropping 1% to lead losses while basic resources gained 1%.

The cautious day's trading follows the trend seen in Asia-Pacific overnight, with lackluster sentiment globally coming after U.S. June inflation data showed consumer prices surging at their fastest pace in nearly 13 years.

Meanwhile, new figures released Wednesday showed U.K. inflation also rose by more than expected in June, with the consumer price index growing 0.5% month-on-month versus a 0.2% consensus estimate.

"For the Bank of England, the size of the inflationary spike is not the main issue, it's for how long inflation will remain above target that really matters," said Hugh Gimber, global market strategist at JPMorgan Asset Management.

"Policymakers will therefore be noting that while the contribution from more volatile parts of the inflation basket such as transport remains large, there are also now signs of inflationary pressures broadening across many parts of the economy."

On Wall Street, the major U.S. stock indexes got a boost from comments from the head of the Federal Reserve Wednesday, with the S&P 500 climbing to a new intraday record. Powell said in prepared remarks that the central bank would not be altering its easy monetary policy for some time.

JPMorgan and Goldman Sachs kicked off earnings season in the U.S. on Tuesday, with both banks beating top and bottom line estimates. Citigroup followed suit with a profit beat before the bell on Wednesday, while Bank of America narrowly missed revenue expectations.

In other data, euro zone industrial production unexpectedly fell by more than expected in May, according to Eurostat, driven mostly by drops in non-durable goods such as food and clothes. Output fell by 1% against an economist consensus of 0.2%.

In terms of individual share price action, Swedish telecoms company Tele2 gained 5.9% to lead the Stoxx 600 by mid-afternoon, after beating second-quarter core earnings expectations and hiking its outlook.

At the bottom of the European blue chip index, Sweden's Avanza Bank fell 9.1% after its second-quarter earnings report.

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— CNBC's Ryan Browne contributed to this report.