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European stock markets experienced a downturn on Tuesday, driven by investor caution ahead of the European Central Bank’s (ECB) upcoming policy meeting later in the week.
As of 03:20 ET (07:20 GMT), the DAX index in Germany declined by 0.6%, the CAC 40 in France fell by the same margin, and the FTSE 100 in the U.K. dropped 0.5%.
ECB Meeting and Inflation Concerns Loom Large
While European equities had seen three consecutive days of gains, a sense of unease has settled over the market ahead of the ECB’s meeting on Thursday. A 25 basis point interest rate cut from record-high levels is largely expected, but the central bank’s future actions remain uncertain due to recent inflation figures.
Eurozone inflation rose to 2.6% year-on-year in May, moving further away from the ECB’s 2% target. This unexpected increase has raised concerns among investors, potentially impacting the ECB’s decision-making process regarding further rate cuts.
Focus on US Labor Market Data
On the economic data front, Tuesday’s highlight is the German unemployment figures, the only significant eurozone data release for the day.
Across the Atlantic, investors are eagerly anticipating the monthly JOLTS report, which is expected to show a further decline in job openings to three-year lows. This data, along with the upcoming payrolls report on Friday, will provide crucial insights into the health of the U.S. labor market ahead of the Federal Reserve’s policy meeting next week.
GSK Stock Stabilizes After Cancer Setback
In corporate news, GSK plc stock recovered slightly, rising 0.1% after a sharp 9% drop on Monday following a U.S. judge’s decision to allow thousands of lawsuits alleging a link between the company’s discontinued heartburn drug Zantac and cancer to proceed.
Overall, European markets are navigating a cautious period as investors await clarity from the ECB on its monetary policy stance in light of recent inflation data. The focus also remains on the U.S. labor market, with key data releases expected to influence market sentiment and the direction of global interest rates.
