German Inflation Data Tremble the Stock Market

As several businesses, notably Swedish retailer H&M, issued warnings about the impact of growing expenses and inflation on their operations on Thursday, the atmosphere was dampened before the release of the hotly anticipated German inflation data.

The STOXX 600 index for the whole continent was down 1.7% at 07:59 GMT. It underperformed a 2% increase on Wall Street overnight. The Bank of England’s emergency bond-buying move’s initial support faded. The world’s second-largest apparel retailer posted weaker-than-expected earnings due to rising input prices, sluggish consumer spending, and its pullout from Russia. Shares of H&M dropped 4.5% as a result. The owner of Zara and market leader Inditex (BME: ITX) fell 2.2%, while the larger STOXX retailers index fell 4.3%.

What Is Happening in the Stock Market?

Allegro, a Polish e-commerce company, suffered a 6.8% loss after lowering its full-year projection for the second time this year, citing the possibility of low demand due to rising inflation. The underwhelming corporate reports at a time when CBs across the world are tightening financial conditions to tame raging inflation heighten investors’ concerns about damage to profits growth. Europe will have a darker winter owing to an ongoing energy crisis.

Statistics indicated that inflation in Germany’s most populated state suffered the greatest surge in decades. Four officials at the European Central Bank on Thursday endorsed another significant interest rate hike. They agreed to a 75 bps increase in October becoming stronger.

Analysts anticipate that September’s harmonized consumer prices (HICP) will rise 10% over the previous year. Over its two most recent sessions, the ECB increased interest rates by 125 bps. However, according to strategists at UniCredit, there is no consensus on whether the depo rate should rise far into a restrictive zone. They added that the recent remarks imply that the ECB plans to achieve the neutral level fast.

The curve-flattening process might resume due to today’s inflation data and the roughly 15 appearances by ECB executives. This should bolster expectations of front-loaded interest-rate rises.

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