Strong pressures on European markets – Plunge of almost 4% in Italy

LAST UPDATE: 17:40

Losses in the main European stock markets intensified on Thursday as investors weighed the European Commission’s new economic forecasts as they digested a surge in US inflation and Italy teetered on the brink of anarchy.

In particular, the pan-European Stoxx 600 index fell 1.7% to 405.4 points, with most sectors in negative territory.

In Frankfurt the Dax index is under strong pressure moving 2.38% lower at 12,451 points, in Paris the CAC 40 is down 2% at 5,882 points, while the FTSE 100 in London is losing 1.8% and moving at 7,027 points.

In the Eurozone, the IBEX 35 index in Madrid fell by 2% to 7,779 points, while the worst picture was presented by the FTSE MIB index in Milan, which plunged 3.9% to 20,483 points affected by the political situation in the country.

It is noted that the government of the neighboring country is facing the risk of collapse, as the coalition government of Prime Minister Mario Draghi received a vote of confidence in the afternoon, but without the support of the 5 Star Movement, which abstained from the process.

European stocks also closed lower yesterday, Wednesday, as investors reacted to a higher-than-expected rise in US inflation. The consumer price index, a broad measure of everyday goods and services, rose 9.1 percent in June from a year earlier, well ahead of estimates for an 8.8 percent rise.

The measure marked another month in which U.S. inflation ran at its fastest pace since December 1981. Excluding volatile food and energy prices, the so-called core CPI rose 5.9 percent, compared with an estimate for 5, 7%.

The disappointing data is expected to prompt the Federal Reserve to raise interest rates by another 75 basis points at its meeting later this month, or as much as 1% to tame prices, after +0.75% in June, which was the Fed’s most aggressive hike since 1994, lifting US interest rates to a range of 1.5%-1.75%.

Investors are also evaluating the Commission’s new forecasts for the economy in the Eurozone, which proceeded with a marginal downgrading of growth to 2.6% from 2.7% predicted in May, while for the EU as a whole the forecast for 2, 7% remained unchanged.

In the size of inflation, there is a revision to 7.6% from 6.8% predicted in May for the Eurozone, while for the EU to 8.3% from 8.4% predicted in May.

This development, combined with the recent weakening of the euro, which yesterday lost absolute parity with the dollar for the first time in 20 years, is raising fears that the ECB may go ahead with a further increase in interest rates next week, from 0 .25% which has been declared by the head of Christine Lagarde.