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European Stocks Drop; Ericsson First to Fall

by Carl Steward
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European StockEuropean Stocks Drop; Ericsson First to Fall

The latest U.S. inflation data increased the likelihood of more monetary tightening, negatively affecting global economic growth. This caused European stock markets to decline somewhat on Thursday.

By 3:50 AM ET (0750 GMT), the CAC 40 in France had declined by 0.5 percent. FTSE 100 in the United Kingdom had fallen by 0.3 percent. Moreover, the DAX in Germany had traded lower by 0.2 percent. Following a jump in consumer inflation in the U.S. to a new four-decade high of 9.1 percent in June, which increased pressure on the Federal Reserve to raise interest rates again, the major European indexes finished on Wednesday.

The U.S. central bank increased its benchmark interest rates by 75 basis points in June. This was the largest rate increase since 1994. Based on this reading, another rate increase of comparable size is likely later this month. It could send the U.S. economy, the primary engine of global growth, into recession.

The U.S. Tightening and The Europe Markets

Additionally, the euro is approaching parity with the dollar because of the tightening of U.S. monetary policy, which creates a problem for the European Central Bank. The possibility of an already record-high inflation rate rising due to the weak currency exists, or the ECB may respond by raising interest rates quickly, further pressuring an already severely affected economy.

In business-related news, the shares of Swedish manufacturer of telecom network equipment Ericsson (ST: ERICa) dropped more than 10% after the company said that the second quarter’s profit margins were significantly impacted by a dramatic increase in the cost of deploying 5G telecom networks.

Deutsche Telekom (ETR: DTEGn) disclosed earlier Thursday that it would sell a consortium 51% of its tower business. Hence, its stock dropped 2%. After the credit reporting business, Experian (LON: EXPN) announced higher first quarter total revenue, mostly due to strong demand in North America, and its stock price increased by 1.7 percent.

As a result of increased activity from the oil and gas industries, Aker Solutions (OL: AKSOA) upped its 2022 revenue prediction, sending its shares up 8.4%. Kone (HE: KNEBV) saw a decline of 0.3% after the Finnish elevator manufacturer reduced its 2019 sales and profit projections.

The post European Stocks Drop; Ericsson First to Fall appeared first on forexinsider24.com.

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