European Markets Fall 5% In August On Rate Hike and Inflation Worries

Bridgette Randall
31 Aug, 2022
Frankfurt

European markets closed down for the fourth day in a row and extended losses to more than 4% in the week on the rising energy supply uncertainties. 

Natural gas prices eased today after Norway initiated natural gas supplies and Iraq-controlled oil companies said crude oil exports are unaffected despite the civil unrest. 

Investors are also anticipating a hike in the interest rate of at least 50 basis points after central banks escalated the rhetoric in support of higher rates now to cool the rapid price increases. 

The need for a large rate increase was underscored by the latest inflation reports from the eurozone, France and Spain today. 

Euro zone inflation rose to a record high in August as elevated energy prices spread wide and deep in the broader economy. 

Consumer prices inflation accelerated to 9.1% in August from 8.9% in July, the statistics agency of the currency zone eurostat reported Wednesday. 

Core inflation, excluding energy, food, alcohol and tobacco prices, increased to 4.3% in August from 4.0% in July.

Separately, France's inflation declined to 6.5% in August from 6.8% in July and Spain's inflation dropped to 10.3% from 10.7% in the corresponding period, according to data released by statistics agencies of two nations. 

The DAX index edged down 126.18 points to 12,834.29, the CAC-40 index declined 85.16 to 6,125.16, and the FTSE 100 index 77.49 to 7,284.10. 

The DAX and the CAC-40 index declined 4.8 and the FTSE 100 index fell 1.8% in August. 

For 2022, the DAX index fell 19.9% and the CAC-40 declined 15.1%, and the FTSE 100 index dropped 2.9%. 

The euro edged up a fraction to $1.004 and the British pound weakened to $1.1684. 

Brent crude edged up 97 cents to $98.79 a barrel and natural gas prices dropped 9.7% to 240euros per megawatt hours, a two-week low, after Norway began the supply natural gas. 

In London trading, Pearson, Mondi, Smurfit Kappa Group, Ocado and Lloyds Banking Group were among the leading gainers today with a rise between 1% and 3%. 

Shell, BP, and National Grid declined between 1% and 2%. 

In Frankfurt trading, Allianz, Porsche Automobil, Hello Fresh and MTU Aero Engines were among the leading losers with a fall between 2% and 4%. 

Bayer, Munich Re, SAP, Deutsche Bank and Infineon Technologies were among the leading gainers with a rise between 0.5% and 1.4%. 

On the earnings front, investors are awaiting quarterly results on Thursday from Pernod Ricard, Johnson Mathey, Auto Trader Group and Imperial Brands.