European Stocks Close Lower As Hot U.S. PPI Data Raises Interest Rate Concerns

(RTTNews) - European stocks closed weak on Friday after data showing hotter than expected U.S. producer price inflation in the month of July triggering speculation the Federal Reserve will likely keep interest rates higher for longer duration.

Comments from San Francisco Fed President Mary Daly said that it was premature to say if the Fed has raised rates enough to bring inflation down to the 2% target weighed on sentiment.

Investors were also concerned about the outlook for China's economic growth.

Data from the U.S. Labor Department showed the producer price index for final demand rose by 0.3% in July following a revised unchanged reading in June. Economists had expected producer prices to inch up by 0.2% compared to the 0.1% uptick originally reported for the previous month.

The report also showed the annual rate of producer price growth reaccelerated to 0.8% in July after slowing to just 0.2% in June. The rate of growth was expected to accelerate to 0.7%.

The pan European Stoxx 600 fell 1.09%. The U.K.'s FTSE 100 dropped 1.24%, Germany's DAX ended 1.03% down, and France's CAC 40 drifted down 1.26%, while Switzerland's SMI lost 0.61%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Poland, Portugal, Spain and Sweden ended weak.

Czech Republic, Norway, Russia and Turkiye closed higher.

In the UK market, Entain, Antofagasta, ABRDN, Scottish Mortgage, Prudential, Flutter Entertainment, Land Securities, Ocado Group, Relx, Glencore, Experian, Hargreaves Lansdown, Schrodders, British American Tobacco and RS Group lost 2 to 5%.

In the German market, Zalando, Continental, Infineon, Hannover Rueck, Adidas, Vonovia and Sartorius declined 2 to 3.25%.

BMW, Mercedes-Benz, Muich RE, Symrise, Merck, MTU Aero Engines, BASF, Siemens, Siemens Healthineers and Deutsche Post also ended notably lower.

Commerzbank climbed about 2.3% and Siemens Energy gained 1.6%. Fresenius, RWE and Henkel gained 0.8 to 1%.

In Paris, Teleperformance shares ended more than 4% down. Stellantis, STMicroElectronics, Unibail Rodamco, WorldLine, Eurofins Scientific, Pernod Ricard and Kering lost 2 to 3.4%.

Dassault Systemes, LVMH, Essilor, Renault, BNP Paribas, TotalEnergies and Hermes International also ended notably lower.

In the Swiss market, shares of UBS Group AG rallied sharply after the lender decided to voluntarily terminate the 9 billion Swiss franc Loss Protection Agreement with the Swiss government, saying it is no longer required.

In European economic releases, France's consumer price inflation eased further in July to the lowest level in nearly one-and-a-half years as estimated, the latest data from the statistical office INSEE showed earlier today.

The consumer price index climbed 4.3% year-over-year in July, slower than the 4.5% gain in June. That was in line with the flash data published on July 27.

France's unemployment rate increased marginally in the second quarter after remaining unchanged in the previous quarter, the statistical office INSEE said in its report. The ILO unemployment rate came in at 7.2% in the second quarter versus 7.1% in the previous quarter.

UK's GDP grew 0.2% sequentially in the second quarter, following a 0.1% rise in the previous quarter, the Office for National Statistics reported. Economists were looking for stagnation in the second quarter.

However, the level of quarterly GDP was 0.2% below its pre-coronavirus level in the fourth quarter of 2019. On a yearly basis, GDP rose 0.4% in the second quarter, which was bigger than economists' forecast of 0.2%.