European stocks are down more than 2% today (June 13) as fears of a global recession
intensify with rising interest rates.
The pan-European Stoxx 600 fell 2.2% by late morning trading, with technology stocks and
automotive shares shedding 3.8% to lead losses as all sectors and major bourses fell into
negative territory.
The slump in sentiment in Europe comes after the region’s major bourses closed in negative
territory last week. Market mood darkened last week with the European Central Bank’s
confirmation that it intends to lift interest rates by 25 basis points at its upcoming July meeting.
A further hike is expected in September, the scale of which will be determined by the medium-
term inflation outlook. The European central bank also raised its inflation expectations for the
Euro zone this year significantly and downgraded its growth forecasts.
U.S. inflation data compounded the losses with the highly anticipated May consumer price index
report coming in hotter than expected, with U.S. headline inflation hitting 8.6%, its highest level
since 1981.
The red-hot figure reignited market fears that the U.S. Federal Reserve will need to hike interest
rates more aggressively to reign in inflation, and risks tipping the economy into recession.
Fed officials will announce their next policy move later this week (June 15) and are widely
expected to opt for a hike of at least 50 basis points, though market bets for a 75-basis point
increase have risen following the latest inflation data.
Shares in Asia are also down today as major markets in the region saw sharp losses and the
dollar-yen hovered around the 135 level.
The British economy unexpectedly contracted by 0.3% month-over-month in April, official data
shows, furthering fears of a slowdown ahead of the Bank of England’s latest monetary policy
announcement on June 16.
