European stock markets falter amid soaring UK inflation

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LONDON — European stock markets faltered as investors digest news that UK inflation has hit a 40-year high, stoking fears of the economic impact of skyrocketing global consumer prices.

London shares were down 0.1% as official data showed UK inflation hit 9% in April due to soaring energy costs.

The news sent the pound plummeting on fears the cost of living crisis could trigger a recession in Britain, in line with recent Bank of England forecasts.

In the euro zone, Frankfurt shares stagnated and Paris also lost 0.1% in value.

– The “increasingly inevitable” recession –

“It’s been a relatively flat day so far,” OANDA analyst Craig Erlam told AFP.

“A recession looks increasingly inevitable in the UK and other countries…if inflation data does not improve.

“That doesn’t bode well for the stock markets.”

The technical definition of a recession is two quarters of economic contraction in a row.

Investors remain on red alert over decades-high inflation, which has risen around the world as Russia’s invasion of Ukraine fuels soaring energy and food prices.

This in turn has triggered interest rate hikes from major central banks, including the Bank of England and the US Federal Reserve, as they seek to contain runaway prices.

Asian stocks traded mixed on Wednesday, despite strong gains on Wall Street after buoyant U.S. retail sales data.

The Fed’s monetary policy tightening has jolted markets this year, heightening apprehension among investors already troubled by China’s Covid-19 lockdowns and Russia’s invasion of Ukraine.

But there was good news from the United States, with data showing an increase in spending by Americans in April. Retail sales rose 0.9%, spurred in part by a rebound in auto purchases.

Fed Chairman Jerome Powell said on Tuesday there must be “clear” evidence that US inflation is falling before efforts to cool the economy can be withdrawn.

And he acknowledged it could be a “bumpy” ride that would inflict some pain.

The world’s largest economy is also facing the fastest inflation in about four decades, prompting the Fed to scramble to try to ease price pressures.

He announced earlier this month the biggest increase in interest rates since 2000.

Powell said policymakers agree another aggressive increase is “on the table” in June and July.

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