European markets slide as Sweden outlines rate hike concerns

Receive free currency updates

we will send you one myFT Daily Digest Latest Email Rounding Currencies News every morning.

European shares made a cautious start on Thursday as an interest rate hike in Sweden this week reinforced central bankers’ message that further increases in global rates may be needed to curb inflation.

The pan-European Stoxx 600 was flat while France’s CAC 40 rose 0.1 percent. The FTSE 100 fell 0.2 percent in London.

A group of central bankers signaled at the annual European Central Bank meeting in Portugal that more action may be needed to stem rapid price increases, despite fears that monetary policy tightening would trigger an economic recession , a day after which this step was taken.

Bucking the trend, the Swedish central bank raised its rate by a quarter percentage point to 3.75 percent on Thursday, as expected.

Attention was drawn to Germany’s inflation report coming later in the day, which showed the rate of price rise in the eurozone’s biggest economy rose to 6.3 percent in June from 6.1 percent in the previous month, according to Reuters. Survey of Economists.

“Today’s first inflation release for June from the eurozone will likely confirm what central bankers have been stressing: their work is not done,” said Antoine Bouvet, head of European rate strategy at ING.

Eurozone-wide data published on Friday is expected to show that headline inflation slowed, but the closely watched core data, which does not include volatile food and energy prices, rose in a sign that the ECB’s A tough campaign can go on for a long time.

Speakers at the ECB meeting this week reiterated that the eurozone benchmark deposit rate will almost certainly rise at the next meeting in July, well above its current 22-year high of 3.5 percent.

Meanwhile, contracts tracking Wall Street’s benchmark S&P 500 and the tech-focused Nasdaq 100 were flat ahead of the New York open.

Both indexes were volatile in the previous session, when Federal Reserve Chairman Jay Powell reiterated that US interest rates would probably go higher, and did not rule out two consecutive hikes.

In government bond markets, the yield on the policy-sensitive two-year Treasury rose 0.04 percentage points to 4.76 percent, while the yield on the benchmark 10-year note rose 0.04 percentage points to 3.75 percent. Bond yields rise as prices fall.

The dollar, which strengthens when investors expect rates to rise, rose 0.1 percent against a basket of six peer currencies, reaching its highest level in two weeks.

In Asia, equities declined, with Hong Kong’s Hang Seng index falling 1.4 percent, while China’s CSI 300 shed 0.5 percent and Japan’s Topix fell 0.1 percent.