Europe Extends Loss on Inflation Fears

Ivaylo
15 May, 2006
Frankfurt

Sentiment remained glum, overwhelmed by worries of the long-term influence of the advancing commodity prices on inflation and interest rates. After a strong beginning last week, equity markets declined on Thursday and Friday, led by the surprising aggressiveness of the U.S. Federal Reserve, hiking interest rates again on Wednesday. London

[R]6.30AM Europe tumbles in early trading on inflation and interest rates.[/R]
European markets extended their losses in early trading, following worrisome news about the continuing rise of commodity prices and their impact on equity stocks. London’s FTSE 100 shed 1% in early trading, Frankfurt’s Xetra Dax slid 0.9 %, the French CAC 40 declined 1.1%. Oil stocks dropped in Europe following the fall in crude prices due to reports that the surging energy costs would affect global demand and consumer sentiment. Norway’s Statoil fell 2.9 %, Total in France edged 1% down, and Repsol in Spain lost 1%. Financial stocks were also hit on fears of rising interest rates. France’s CNP Insurances fell 3.6% and Allied Irish Bank declined 2.8%.

Oil continued its decline as IEA on Friday outlined the risk of soaring energy costs hitting consumption. Light crude fell $1.19 to $70.85 a barrel by 3:34 a.m. EST, London Brent crude shed $1.48 to $70.84. Precious metals also fell, with gold losing $21.80 to $692.50 an ounce. The dollar braked the losing momentum in early trading on Monday, gaining ground on the euro and the yen due to the declining commodity futures such as gold and oil. The euro bought $1.2842, down from $1.2898 late Friday. The dollar edged up against the yen, standing at 110.21 yen from 109.95 yen in late Friday trading.