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European stock markets drop ahead of inflation data

written by Bella Palmer

The DAX index in Germany was 0.3% lower, and the FTSE 100 in the U.K. shed 0.2% while the CAC 40 in France gained 0.1%

European stock markets largely dropped Thursday, with rising global bond yields hitting sentiment ahead of the release of highly anticipated inflation data at the end of the week.

At 07:10 GMT, the DAX index in Germany was 0.3% lower, and the FTSE 100 in the U.K. shed 0.2% while the CAC 40 in France gained 0.1%.

Equities have pulled back in Europe, following the weakness on Wall Street and the losses in Asia overnight, with sentiment pressured by increasing U.S. Treasury yields as concerns about inflation play into the narrative that interest rates will remain higher for longer than expected.

The two-year U.S. Treasury yield was near the 5% level on Thursday while the 10-year yield stayed near its strongest level in weeks.

Data released on Wednesday showed consumer prices in Germany increased more than forecast in May, ahead of the eurozone's figures on Friday.

The eurozone inflation release is expected to rise 2.5% in May year-on-year, from 2.4% in April.

The ECB is widely expected to cut interest rates next week, but uncertainty over what follows is making investors nervous.

Over in the U.S., the focus is squarely on upcoming GDP data later in the session, and more importantly the personal consumption expenditure price index data, the Fed’s preferred inflation gauge, on Friday.

Several Federal Reserve officials have cautioned that there needs to be more substantial progress on inflation before the U.S. central bank should be considering cuts.

In corporate news, BHP Group stock dropped 1.7% after the mining giant decided against making a formal offer for Anglo American, walking away from its $49 billion takeover deal.

We were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost, BHP said in a statement, adding that it did not get "key information" from Anglo to address these risks.


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