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focus on profits, US inflation, data

European stocks fell on Thursday after markets around the world were frightened by the latest data on inflation in the United States.

The pan-European Stoxx 600 fell 1.1% at the start of trading, with basic resources falling 2.6% to lead to losses as all sectors and major stock market trades went red.

European markets followed the negative trend observed in the Asia-Pacific region at night, and the United States on Wednesday, after the latest data on US inflation in April showed higher than expected price pressure.

The U.S. Department of Labor said prices that U.S. consumers pay for goods and services accelerated at their fastest pace since 2008 in April, with the consumer price index jumping 4.2 percent from a year ago.

This has raised fears that the US Federal Reserve may raise interest rates sooner rather than later.

Read more: Inflation misleads stocks and raises fears that the Fed is wrong, that the jump in prices is temporary

The data caused a sharp decline in US stocks, as the Dow fell 681

points, or 1.99% lower to reach its worst session since January. The S&P 500 lost 2.1%, its biggest one-day drop since February, while the heavy Nasdaq Composite fell 2.6%.

Earlier, the Fed said the rise was temporary and would tolerate rising inflation above the 2% target. He said he would consider a set of inflation acceptable.

However, the concern is that inflation may become too hot and the Fed will be forced to raise interest rates and continue to raise them – negative for stocks.

US stock futures were mixed at the start of market trading on Thursday, with Dow futures falling while Nasdaq futures slipped into positive territory.

Profits in focus

Profits in Europe come from Burberry, BT Group and Telefonica.

Burberry has recovered its dividend and said its recovery from the crisis has accelerated, with sales and profits lower than the same period last year, but above analysts’ average forecasts.

However, shares of the British luxury brand fell 8% at the beginning of trading, the second weakest manufacturer in Stoxx 600 after the Danish hospital equipment manufacturer Ambu, which collapsed by another 22% after issuing a profit warning on Wednesday.

“The weak broader market and some elements of profit made an ugly start to the stock in response to the results,” Richard Hunter, head of markets at Interactive Investor, told Burberry.

“Although this update will calm the bulls of the shares, given the recent strength of price indicators, the shares are considered to be concomitant for the time being, and the market consensus will be maintained.”

Telefonica shares rose 3.3% at the start of trading after a positive profit, while BT fell 2.8%.

“BT’s results are largely in line with expectations of revenue and profits falling from consumer demand and a well-intentioned bonus for staff for their work during the pandemic,” said Ben Baringer, a capital research analyst at Quilter Cheviot.

“Although it performed well in the short term, uncertainty remains for a business that is complex and where inefficiency remains.”

At the top of the European blue chip index, Sweden’s Evolution Gaming rose 5% to recover in part from Wednesday’s steep decline amid blockchain pricing.

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– Patti Domm and Thomas Franck of CNBC contributed to this report.

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