Europe open: Stocks slump on US CPI, UK GDP figures

European stocks continued their decline at the open on Monday, falling 1.38% after the UK economy reported an unexpected contraction in April and US inflation surged again last week.

The pan-European Stoxx index has fallen over the past week on inflationary concerns, heightened last week after a data showed US CPI surged 8.6% in May, its biggest gain since 1981.

“The latest inflation print proved too hot to handle, prompting investors to scramble for cover in anticipation of a more aggressive set of central bank moves,” said Interactive Investor head of markets Richard Hunter.

“As such, the Federal Reserve (rate) decision on Wednesday takes on added significance. While investors were relatively comfortable with a likely hike of 0.5%, the fresh inflationary pressure has had some questioning whether a rise of 0.75% could be on the table.”

“In turn, this would reignite concerns – which had never been far away – that a newly determined round of aggressive monetary tightening could crimp economic growth, to the extent that the spectre of recession emerges.”

In the UK, the latest figures from the Office for National Statistics showed the economy shrank by 0.3% in April amid higher prices and supply chain issues following a 0.1% decline in March, and versus consensus expectations of 0.1% growth.

For the first time since January 2021, contractions seen in services, production and construction.

Fears of a global slowdown were also exacerbated by the introduction of mass Covid testing and more restrictions in Shanghai.