European stock markets are expected to open lower on Wednesday, continuing the global sell-off that began after higher-than-expected US inflation data fueled speculation that the Federal Reserve will tighten money even further.
At 02:05 ET (06:05 GMT), the DAX futures contract in Germany was down 0.3%, the CAC 40 futures contract in France was down 0.2%, and the FTSE 100 futures contract in the U.K. was down 0.2%.
After the U.S. consumer price index for August came in higher than expected on Tuesday, Wall Street and Asia both sent bad news to Europe.
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This makes it more likely that the Federal Reserve will keep raising interest rates quickly this year to fight inflation, even if it means the largest economy in the world could fall into a recession.
Now, the markets are pricing in a high chance that the Fed will raise rates by 75 basis points next week, but they are also taking into account the chance that rates will go up by 1%.
Back in Europe, inflation is even worse. In August, consumer prices in the U.K. went up 0.5%, which is 9.9% more than the same time last year.
Even though this is a small drop from July, it still makes it likely that the Bank of England will keep tightening, even though the country is expected to go into a long recession in the fourth quarter.
Bank of America thinks that the BoE will raise interest rates by a half point next week and at its next two meetings. Then, in 2023, the BoE will raise rates by another quarter point, bringing them to 4% by August of next year.
Inditex (BME:ITX), which owns the Zara brand, will be in the news on Wednesday because the fashion giant reported a 24.5% increase in six-month sales and a higher profit than a year ago. The company ended July on a strong note, just before fashion demand started to drop last month because of high inflation.
The strong U.S. inflation data released on Wednesday caused oil prices to drop. This raised the possibility of another big interest rate hike, which would boost the dollar and probably slow down economic growth.
The Organization of Petroleum Exporting Countries (OPEC) released its monthly report, which repeated predictions that the world’s demand for oil will grow in 2022 and 2023, even though inflation is going up. This helped limit the losses.
According to data released Tuesday by the American Petroleum Institute, crude stocks in the U.S. went up by just over 6 million barrels last week. Official data from the Energy Information Administration is due later in the session.
Related: European stock futures are mixed, and attention is on the U.S. CPI report.
By 2:05 ET (6:05 GMT), U.S. crude futures were down 0.4% to $86.95 per barrel, while the Brent contract was down 0.5% to $92.75.
Also, gold futures went down 0.3% to $1,712.85/oz, and EUR/USD went up 0.2% to 0.9985.