European Stocks End Sharply Lower As U.S. Inflation Data Fuels Rate Hike Fears

European stocks tumbled on Tuesday as hotter-than-expected U.S. inflation data raised fears about aggressive interest rate hike by the Fed at its upcoming policy meeting, and triggered widespread selling in several sectors.

Data from the U.S. Labor Department showed the consumer price index inched up by 0.1% in August after coming in unchanged in July. Economists had expected consumer prices to edge down by 0.1%.

Compared to the same month a year ago, consumer prices were up by 8.3% in August, reflecting a slowdown from the 8.5% spike in July. However, economists had expected the annual rate of growth to slow to 8.1%.

Meanwhile, the annual rate of growth by core consumer prices accelerated to 6.3% in August from 5.9% in July. The annual rate of growth was expected to rise to 6.1%.

Disappointing data from the U.K., Germany and Switzerland also weighed on sentiment.

The pan European Stoxx 600 fell 1.55%. The U.K.’s FTSE 100 drifted down 1.17%, Germany’s DAX dropped 1.59% and France’s CAC 40 ended 1.39% down, while Switzerland’s SMI slid 0.9%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Ireland, Netherlands, Poland, Portugal, Spain, Sweden and Turkiye ended sharply lower.

Iceland, Norway and Russia posted moderate losses, while Czech Republic closed higher.

In the UK market, Ocado Group shares plunged 14.6% after Ocado Retail, a joint venture between Ocado Group and Marks & Spencer Group, flagged a dip in full-year sales. Marks & Spencer shares fell 3.8%.

Scottish Mortgage, IAG, Segro, Melrose Industries, Persimmon, Next, Auto Trader Group, Barratt Developments, Kingfisher, ICP, ABRDN and Tesco drifted down 3 to 5%.

Aveva Group shares rallied more than 3% amid reports that France’s Schneider was nearing a deal to buy out the company.

In the French market, Atos dropped more than 7%. Faurecia, Dassault Systemes, Unibail Rodamco, Air France-KLM, ArcelorMittal, STMicroElectronics and Renault ended lower by 3 to 4.5%.

Michelin, CapGemini, Legrand, Essilor, Airbus Group, Saint Gobain and Safran also declined sharply.

Data from the Office for National Statistics showed the UK unemployment rate hit its lowest level in 48 years in three months to July, falling to 3.6% in the quarter. The rate was expected to come in at 3.8%.

Germany’s consumer price inflation accelerated as initially estimated in August, latest figures from Destatis showed. The consumer price index rose 7.9% year-on-year in August, faster than the 7.5% increase in July. That was in line with flash data published on August 30.

The harmonized index of consumer prices, or HICP, climbed 8.8% year-on-year after an 8.5% increase in the prior month. The latest figures confirmed the initial estimate.

German economic confidence weakened in September to the lowest since late 1992 as financial market experts were more concerned about the prospect of energy shortages in the winter and its subsequent impact on the economy, a closely watched survey revealed Tuesday.

The ZEW Indicator of Economic Sentiment fell to -61.9 in September from -55.3 in August, survey results from the ZEW – Leibniz Centre for European Economic Research showed. The reading was the lowest since December 1992 and also below economists’ forecast of -60.0.

Data from the Federal Statistical Office showed Switzerland’s producer and import prices rose 5.5% year-on-year in August, slower than the 6.3% increase in July.

Further, this was the weakest rate of increase since January last year, when prices had grown 5.4%.

The producer price index climbed 3.8% annually in August, following a 4.1% rise in the previous month. Import prices increased 8.9% from last year.