European Stocks Waver as U.S. Inflation and Tariff Concerns Rattle Markets
European stock markets opened mixed on Wednesday as investors digested fresh U.S. inflation data and braced for additional reports that could shape expectations for future interest rate decisions. The MSCI World Equity Index slipped 0.1%, and Europe’s STOXX 600 dipped 0.2%, reflecting global caution. London’s FTSE 100 bucked the trend slightly, rising 0.1%. This comes after U.S. consumer price data released on Tuesday showed inflationary pressure possibly driven by tariffs, which rattled investor confidence and led to declines in U.S. equities.
Market sentiment was further dampened by renewed tariff threats from former U.S. President Donald Trump, who announced plans to notify smaller nations of updated U.S. tariff rates and floated the possibility of a 30% tariff on imports from Mexico and the EU starting August 1. The uncertainty surrounding U.S. trade policy pushed Treasury yields higher and caused the dollar to spike on Tuesday, although it steadied by Wednesday morning.
Adding to the global inflation picture, UK consumer price inflation unexpectedly climbed to its highest level in over a year, giving the British pound a slight lift against the dollar. Investors and analysts are closely watching for the U.S. producer price data expected later in the day, which will provide additional clues about how deeply tariffs are feeding into broader price increases. Despite growing concerns, economists note that there has yet to be a clear and lasting impact of tariffs on official inflation metrics.
In the U.S., the Federal Reserve has held interest rates steady, awaiting clearer signals about inflation’s direction. Chair Jerome Powell previously stated that inflationary effects from tariffs were expected during the summer. However, with political pressure from Trump to reduce rates and rising inflation signals, the central bank’s independence and decision-making remain in focus. Markets are currently pricing in a potential Fed rate cut in September.
Meanwhile, investors are also tuning into earnings season, with major U.S. banks including Goldman Sachs, Morgan Stanley, and Bank of America set to report results. In commodities, oil prices climbed on optimism over summer demand from the U.S. and China, while gold prices rose 0.5%, reaching $3,339.70 per ounce, as investors sought safer assets amid growing uncertainty.
Source: Reuters