Europe midday: Shares extend losses on inflation worries
Inflation jitters saw European stocks slide further at midday on Wednesday, after a weaker Wall Street performance overnight and news that UK consumer prices had more than doubled in April.
The pan-European STOXX 600 index was 1.13% lower with Euro zone stocks under pressure as the euro touched a four-month high, making exports more expensive. All major regional bourses paced falls in line with the Stoxx.
A jump in household energy bills and clothing and footwear prices saw British consumer price inflation more than double in April to hit its highest level in more than a year, according to figures released on Wednesday by the Office for National Statistics.
The consumer price inflation rate rose to 1.5% in the 12 months to April from 0.7% in March, in line with expectations and marking the highest reading since March 2020. The rate of core inflation - which strips out volatile elements such as food and energy prices - increased to 1.3% from 1.1%, also in line with consensus expectations.
Investors fear price rises may last for a prolonged period of time, forcing central banks to counter with tighter policy thereby lifting borrowing costs. Traders were also waiting for more clues on policymakers’ views on inflation when the US Federal Reserve releases its minutes from the latest policy meeting.
"Concerns about rising price pressures have served to push UK gilt yields back up towards their recent highs in the past few days, with rising factory gate and commodity prices merely serving to reinforce these concerns," said CMC Markets analyst Michael Hewson.
"We are already starting to see early evidence of having to pay higher prices, notably in terms of higher air fares and other transport costs, which seem to be merely a symptom of normalisation from the big falls we saw a year ago when economies went into lockdown, and as such are unlikely to be repeated, which means they are likely to be transitory in nature."
In equity news, shares in plumbing and heating products supplier Ferguson shares were higher as it reported strong revenue growth of 24.5% in its third quarter, to $5.92bn (£4.17bn), and lifted full-year forecasts.
Miners felt the impact of weaker copper and iron prices with Antofagasta, BHP, Anglo American and Rio Tinto all weaker.