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European stocks fell on Tuesday, as the European Central Bank signaled that interest rates would need to rise further in order to stamp out sticky inflation.
The Stoxx 600 in the European region gave up its early morning gains to trade down 0.2 percent, while the German DAX fell 0.1 percent, and the FTSE 100 settled in London.
Stocks fell after European Central Bank President Christine Lagarde said in a speech that “her work is not done,” suggesting that policymakers will need to tighten monetary policy further in order to tame persistent inflation in the region.
“Unless there is a fundamental change in expectations, we will continue to raise interest rates in July,” Lagarde noted, adding to investor concerns that higher borrowing costs could affect growth in the single currency bloc.
The European Central Bank is likely to be affected by inflation figures due on Friday, economists said. Price growth is expected to come in at 5.7 percent in the year to June, compared to 6.1 percent in the previous month.
However, rate-setters are likely to remain concerned about underlying price pressures in the region. Core inflation, which excludes volatile food and energy prices, is expected to accelerate, necessitating further tightening from the ECB.
The European Central Bank in June raised the deposit rate by a quarter point to 3.5 percent, its highest level in 22 years.
Still, Wall Street futures rose, with contracts tracking the benchmark S&P 500 index gaining 0.2 percent, while contracts tracking the tech-heavy Nasdaq 100 index gained 0.4 percent before the New York open.
Oil prices continued to fluctuate after the armed insurrection in Russia over the weekend raised serious questions about the future of Vladimir Putin’s regime and doubts about crude oil production from one of the world’s leading suppliers.
International benchmark Brent crude traded 1 percent lower at $73.48 a barrel, while West Texas Intermediate crude also fell 1 percent at $68.71 a barrel.
In China, stock markets were higher, with Hong Kong’s Hang Seng up 1.9 percent and China’s CSI 300 up 0.9 percent.
Investors welcomed assurances that Chinese officials intend to shore up growth in the world’s second-largest economy, which has struggled to regain steam this year since reopening after the pandemic.
Known as “Summer Davos,” Chinese Premier Li Qiang gave a speech at the annual meeting of the World Economic Forum’s New Champions, where he spoke of Beijing’s intentions to enact more effective policies to support domestic demand.
Policymakers this month cut record interest rates in an effort to stimulate growth, but economists expect a range of additional support measures over the coming months.
