European stocks fall ahead of US inflation data

European shares fell on Wednesday as investors awaited US inflation data expected to reach its highest level in 40 years, which supports a large interest rate hike and may push the euro to parity with the dollar.

The pan-European Stoxx 600 index fell 0.8 percent after closing higher in a volatile trading session on Tuesday. The largest declines were recorded in the banking, healthcare and mining sectors.

The price of the euro has fallen in the recent period, amid investors’ fear that the tightening of monetary policy will cause an economic recession.

Markets expect US inflation data for June, which is expected to be released at 1230 GMT, to lead to a new surge in the dollar’s price to reach parity with the single European currency.

Shares of Spanish banks and electricity companies fell further after the government announced that it would impose a temporary tax on companies to raise about seven billion euros in 2023 and 2024 to help citizens adapt to inflation.

Amid an energy row with Russia, Germany’s financial watchdog has warned that the sector faces an uncertain future while banks are already struggling with loan defaults.

The German DAX index fell 1.2 percent, leading European indices lower.