European stocks end lower as US CPI strengthens Fed tightening

European stocks closed lower on Tuesday (13) after the August result of consumer inflation in the United States increased bets for a more aggressive monetary tightening by the Federal Reserve (Fed, the American central bank).

The indicator led the market to price about a 20% chance of a 100 basis point hike in interest rates next week, which painted a picture of caution in business.

At around 12:50 pm (GMT), the pan-European Stoxx 600 index was down 1.50% to 421.33 points.

The US consumer price index (CPI) rose 0.1% in August from July, while the core rose 0.6%, according to data from the US Labor Department.

Analysts consulted by Projections Broadcast predicted a drop of 0.1% for the full data and an advance of 0.3% for the core.

After the release of the numbers, the financial market began to price a still minority possibility of raising the Fed’s interest rates by 100 basis points next week.

In the markup, the CME Group monitoring tool indicated a 16% chance of an uplift of this magnitude and an 84% chance of a 75 basis point upside.

Economist Angelo Polydoro, ASA Investments, considers an increase of 0.75 percentage point more likely, but believes that today’s data could lengthen the cycle of monetary tightening.

“Today’s inflation poses a risk that the Fed will raise interest rates further,” he says.

Adjustments in betting after the CPI put a stop to the rally that had been rehearsing on global stock exchanges in recent sessions.

In London, the FTSE 100 index fell 1.17% to 7,385.86 points. Already the CAC 40, reference in Paris, lost 1.39%, to 6,245.69 points.

In Frankfurt, the DAX dropped 1.59%, 13,188.95 points. There, the release of the German economic expectations index also had an impact, which dropped -55.3 points in August to -61.9 points in September, according to a survey by the ZEW institute.

For Capital Economics, the result is further evidence that Europe’s biggest economy is already in contraction territory.

The final reading of the German CPI showed an acceleration of 7.9% in August, on an annual basis, and an increase of 0.3%, in the monthly comparison.

In Milan, the FTSE MIB lost 1.36% to 22,303.86 points. Among the Iberian markets, the PSI 20, from Lisbon, dropped 0.91%, to 6,025.52 points, while the Ibex 35, from Madrid, dropped 1.50%, to 8,071.70 points, in the preliminary reading.