European stocks open to close as markets are rattled by central banks

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LONDON — European stocks were choppy on Tuesday after sharp declines in global markets on Monday, amid fears that central banks will be forced into aggressive monetary policy tightening with inflation remaining high.

The pan-European Stoxx 600 hovered around the flatline by mid-morning, having given back opening gains of around 1%. Banks climbed 1.5% while travel and leisure stocks fell 0.7%.

Global stock markets were sent reeling on Monday, with investors reacting to the potential for more aggressive rate hikes by central banks in Europe and the United States after the latest inflation report.

The U.S. consumer price index report released for May on Friday came in hotter than expected at 8.6% annually, resurfacing market concerns that action from the Federal Reserve and other central banks could hike rates more quickly, a move that could risk tipping the global economy into recession.

Fed meets

“Inflation is unlikely to peak until after the summer, GDP has fallen for the second month running, and the economy remains very vulnerable to another spike in energy prices given the high dependence on natural gas,” he said, suggesting that the BoE may ramp up its monetary policy tightening with a 50-basis-point hike on Thursday.

“Most importantly, however, the Bank would be wise to place a strong emphasis on data dependency. The range of outcomes for the UK economy is very wide over the next six months.”

Euro area industrial production data for April and Germany’s ZEW index of economic sentiment for June are also due on Tuesday.

In terms of individual share price movement in Europe, Finnish utility Fortum climbed more than 8% to lead the Stoxx 600 in early trade after a report suggested it plans to sell its Russian power assets by July 1.

At the bottom of the index, French IT company Atos plunged 19% after announcing that CEO Rodolphe Belmer will step down after just five months at the helm, amid reports of deep strategic divisions within the firm’s leadership.

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