European markets fell Tuesday with German equities facing a double hit from record inflation and tumbling banking stocks, though New York opened strongly with investors reassured that a robust US consumer price index did not come as hot as some feared.
The FTSE 100 index ended down 41.65 points, or 0.6%, at 7,576.66 on Tuesday. The mid-cap FTSE 250 index lost 105.47 points, or 0.5%, at 21,009.61 while the AIM All-Share index inched up just 0.13 of a point at 1,055.66.
The Cboe UK 100 index ended down 0.4% at 755.02. The Cboe 250 closed down 0.5% at 18,479.93, and the Cboe Small Companies lost 0.2% at 15,408.43.
In mainland Europe, the CAC 40 in Paris lost 0.3%, while the DAX 40 in Frankfurt ended down 0.5%.
US markets were lifted by hopes of inflation slowing down, but stocks in London remained weak.
At the time of the closing bell in London, the Dow Jones Industrial Average was up 0.8%, the S&P 500 up 1.0%, and the Nasdaq Composite surged 1.3%.
US consumer prices have accelerated at a pace not seen since the early 1980s, government data showed Tuesday, as energy prices skyrocket.
Data from the US Bureau of Labor Statistics showed consumer prices were 8.5% higher in March, on an annual basis, matching market consensus, according to FXStreet, and stepping up from the 7.9% increase seen in February.
March’s inflation reading now becomes the largest 12-month increase since December 1981.
Core inflation, which strips out food and energy prices, marched 6.5% higher in March versus the year before - though this was slightly slower than the 6.6% pencilled in by analysts - while the monthly figure also undershot expectations at 0.3%.
Against the yen, the dollar was trading at JP¥125.14 at the time of the European equities close, down from JP¥125.52. The pound, seeing little boost from a strong UK unemployment figure, fell to $1.3037 from $1.3040.
The euro, meanwhile, in the run-up to Thursday’s European Central Bank meeting, gave up its French election-driven gains from Monday. The euro was priced at $1.0863, down from $1.0889.
Inflation in Germany raced to 7.3% in March, ahead of the 5.1% figure seen in February.
Statistics agency Destatis noted March’s reading saw inflation reach its highest level since German reunification - as energy prices continue to soar.
While New York equities saw the positives from a robust inflation reading, with the core figure undershooting expectations, investors in Europe continue to be wary of consumer price rises.
Also hurting key European stock market benchmarks was selling pressure in the banking sector.
Two of Germany’s banking heavyweights were suffering on Tuesday, with reports of an undisclosed investor in Deutsche Bank and Commerzbank selling stakes in both companies, Reuters said on Tuesday.
The news sent the share prices of both sinking, with Deutsche down 9.4% and Commerzbank falling 8.5%.
Reuters reported that the shareholder has sold 116 million shares in Deutsche Bank and 72.5 million shares in Commerzbank, shedding stakes worth more than 5% in both banks.
London-listed banking stocks also struggled. HSBC fell 2.4% and Standard Chartered lost 2.2%.
Diploma topped the FTSE 250 index, adding 10%.
The London-based specialised technical products and services company said it has seen double-digit underlying growth in the second quarter - in line with its first-quarter performance - driven by ‘robust’ demand and market share gains.
Looking ahead, Diploma said it anticipates low double digit underlying revenue growth and reported revenue growth of a ‘little over’ 20%. This would exceed its previous guidance of revenue growth of around 10% including mid-single-digit underlying revenue growth.
The travel sector had a largely difficult trading day. British Airways parent International Consolidated Airlines Group fell 1.7%, Wizz Air lost 2.3% and Tui dropped 3.7%.
EasyJet bucked the trend, however, rising 1.7%. It said it expects a narrowed half-year loss with current operations running broadly as planned despite widespread reports of disruption.
For the first half to March 31, the budget airline expects to report revenue of £1.50 billion, with headline costs around £2.05 billion. It has guided for a headline pretax loss in the range of £535 million to £565 million, which would be narrowed from £701 million year-on-year.
Asos rose 4.8% despite posting an interim loss as the fast fashion company faces an increasingly difficult market backdrop.
Revenue in the six months to February 28 nudged up 1.4% year-on-year to £2.00 billion from £1.98 billion. However, Asos swung to a pretax loss of £15.8 million from a £106.4 million profit.
‘The big question is whether now is the appropriate time to look at...strategy,’ AJ Bell analyst Danni Hewson commented.
‘Asos’s target market is predominantly younger people, and they might be the ones on lower incomes, and so they might be disproportionately hit by energy bills now taking up a larger chunk of their take-home pay. Now is probably the worst backdrop for trading that Asos has seen since the global financial crisis, and the retailer will be hoping things can only get better from here.’
Brent was quoted at $104.70 a barrel at the time of the equity market close in London on Tuesday, up sharply from $98.80 on Monday evening. Gold stood at $1,973.44 an ounce, higher against $1,952.48 late Monday.
Wednesday’s UK economic calendar has annual results from grocer Tesco and gold miner Petropavlovsk.
The economic calendar has UK inflation data at 0700 BST before US producer price figures at 1330 BST.
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