The inflationary spiral seems well anchored in the euro zone. The latest inflation figures published this Friday exceeded expectations, propelling the euro against the dollar, but severely penalizing European stock markets.
European stock markets weighed down by poor inflation figures
After a favorable start to the session, the main stock markets of the Old Continent quickly declined following the publication of disappointing inflation results in the euro zone.
The flagship EuroStoxx 600 index lost 0.03%, erasing its initial gains of 0.08%. In Paris, the trend is similar with the CAC 40 falling 0.08% to 7,972.26 points, very far from its highest of the day at 7,982.83 points before the alarming statistic.
On the bond market, yields have also tightened. The 10-year German Bund jumped 4.5 basis points to 2.7%, and its 2-year counterpart climbed 4.1 bps to 3.121%.
The single currency on conquering ground facing the specter of prolonged tightening
Where investors were hoping for a figure of 6.9%, the euro zone consumer price index increased by 7% year-on-year in April. A figure higher than forecasts which revives fears of prolonged monetary tightening by the European Central Bank.
In the process, the euro strengthened by 0.1% against the greenback, trading at 1.0842 dollars. Currency traders now anticipate that the ECB will maintain its key rates at high levels for the long term to curb galloping inflation.
The stubborn fight against inflation remains the absolute priority of central bankers, even if it means temporarily sacrificing emerging economic growth. With such stubborn inflationary pressures, investors will have to be patient before hoping for a relaxation of restrictive monetary conditions in Europe.
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