Title: European Stock Futures Sharply Lower; U.S. Inflation, U.K. GDP Hit Confidence

May 12, 2022 02:07AM ET

By: AnalysisWatch

European stock markets are expected to open sharply weaker on Thursday as persistent inflation in the U.S. stokes fears of aggressive monetary tightening and hurts growth in the world's largest economy.

At 2:05 AM ET, DAX futures in Germany were trading 1.8% lower, CAC 40 futures in France were down 2.1%, and FTSE 100 futures in the U.K. were down 1.4%.

European investors will look at the latest inflation data from the U.S. on Thursday, as U.S. consumer prices rose 8.3% in the 12 months through April. While this was slower than the 8.5% increase in the previous month, it was also above market forecasts of 8.1%.

The data cast doubt on whether the inflation cycle has turned a corner, as it remained very close to last month's 40-year high, raising renewed concerns about the extent of the economic damage caused by the aggressive interest rate hikes needed to contain it.

The potential weakness in the world's economic engines is adding to the deteriorating global picture, with the war in Ukraine threatening an energy crisis in Europe and the ongoing COVID lockdowns in China hurting the growth potential of the world's second-largest economy.

Signs of the slowdown in Europe emerged Thursday with the release of preliminary first-quarter GDP data from the United Kingdom. Although the economy grew by 0.8% in the first quarter, this was weaker than expected, and the monthly figure for March actually fell by 0.1%.

The season of quarterly results from companies in Europe continues, with Merck KGaA expecting profit growth of up to 9% this year as the German chemical company's laboratory equipment business benefits from drugmakers' efforts to explore new biotechnologies.

Figures from companies such as Veolia Environnement, Bouygues, Aegon, Allianz, Commerzbank, RWE, Siemens, and Zurich Insurance will also be closely watched.