LONDON: Europe’s main stock markets fell Tuesday after gains in Asia, as attention turned to economic data and its impact on the outlook for interest rates.
The week’s main focus is expected to be US inflation figures Wednesday, while attention is also on the oil market on concerns about a broader war in the Middle East.
Crude futures dropped Tuesday but remained well up over the week owing also to an escalation of tensions in major oil producer Russia.
The White House warned that a “significant set of attacks” by Iran and its proxies against Israel was possible as soon as this week after top leaders of Hezbollah and Hamas were assassinated in late July.
While the mood on trading floors has calmed since last week’s volatility, investors remained cagey before US consumer and wholesale price figures this week that could play a role in the Federal Reserve’s monetary policy decision-making.
European shares muted as investors brace for data week
Observers warned that the inflation readings could cause big market moves in either direction, with a weaker-than-expected print adding to worries about the world’s biggest economy, while a strong reading could dent rate-cut bets.
“One of the major risks is the timing and magnitude of the Fed’s rate cuts,” said ACY Securities’ Luca Santos.
“If the Fed delays easing monetary policy, the US economy could risk entering a deeper slowdown, leading to a potential recession.
“Conversely, if the Fed cuts rates too aggressively, it might reignite inflationary pressures or create financial market instability. Balancing these risks will be crucial for maintaining economic stability,” Santos added.
After a tepid Monday on Wall Street, Asian markets extended a strong start to the week.
Tokyo surged, with traders catching up with Monday’s gains elsewhere after a long holiday weekend in Japan.
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