European Stocks Close Sharply Lower

European stocks closed sharply lower on Tuesday as rising inflation raised speculation that the Federal Reserve, as well as central banks in some other big economies, might wind back monetary policy support sooner than expected.

Expectations about inflation in the U.S. hit the highest level in about a decade, with the Fed attributing the increase in inflation to “transitory factors.” Analysts have suggested the central bank will still begin considering tapering its asset purchases in the coming months.

Germany’s wholesale prices rose 7.2% year-on-year in April, growing at the fastest pace in a decade in April on higher petroleum product prices, data released by Destatis showed. Prices had surged up 4.4% in March. On a monthly basis, wholesale prices gained 1.1% but slower than the 1.7% increase posted in March.

German economic confidence reached its highest level in more than two decades in May as the slowing down of the third COVID-19 wave made financial market experts more optimistic, survey data from the ZEW – Leibniz Centre for European Economic Research showed.

The ZEW Indicator of Economic Sentiment rose sharply to 84.4 in May from 70.7 in April. The last time the indicator had reached a higher level was in February 2000. The score was forecast to climb to 72.0.

China’s consumer price inflation rose at a slower-than-expected pace in April, while producer prices grew at the fastest pace in more than three years, driven by higher commodity prices, official data showed today.

The pan European Stoxx 600 fell 1.97%. The U.K.’s FTSE 100 drifted down 2.47%, Germany’s DAX shed 1.82% and France’s CAC 40 slid 1.86%, while Switzerland’s SMI ended 1.21% down.

Among other markets in Europe, Belgium, Denmark, Finland, Greece, Ireland, Netherlands, Norway, Portugal, Russia, Spain, Sweden and Turkey ended sharply lower, with their benchmark indices losing 1 to 3%.

Austria, Czech Republic, Iceland and Poland also closed weak, albeit with less pronounced losses.

In the UK market, IAG declined 7.4% after announcing a convertible bond offering plan worth 800 million euros.

Renishaw and Melrose Industries ended lower by 6.7% and 6.3%, respectively. Flutter Entertainment, Rolls-Royce Holdings, Scottish Mortgage, Next, Prudential, Royal Dutch Shell, Mondi, Standard Life, BP, ICP, Coca-Cola and HSBC Holdings shed 3 to 5%.

Natwest Group shares ended lower by about 3% after the government sold another tranche of shares in the banking giant.

E-commerce group THG soared more than 12.5% on news it is raising more than $1 billion in equity for future deals.

In France, Renault tumbled more than 6% and Technip ended nearly 5% down, while Engie, STMicroElectronics, Valeo, Accor, Sodexo, Danone, Air France-KLM, Safran, Total, Capgemini, ArcelorMittal, LVMH and Publicis Groupe lost 2 to 4%.

Capgemini shares declined sharply after the company announced signing of a five-year contract with Airbus to support the redesign of its global collaborative workplace, both in terms of working methods and tools. Shares of Airbus Group too ended sharply lower.

In the German market, Thyssenkrupp plunged more than 10% despite raising its full-year outlook for the second time in three months.

Lufthansa ended lower by about 5.5%. Munice RE, Siemens, RWE, Deutsche Wohnen, Deutsche Post, MTU Aero Engines, BASF, HeidelbergCement, Deutsche Bank and Fresenius lost 2 to 3%.

Shares of consumer electronics retailer Ceconomy AG slumped more than 10% after the company reported a wider adjusted EBIT loss.

Sweden’s Evolution Gaming Group plunged nearly 14% after the bookrunner announced the pricing of block trades.