Inflation is bleeding European stock exchanges, the euro soars nonetheless!

The inflationary spiral seems well anchored in the eurozone. The latest inflation figures released this Friday exceeded expectations, propelling the euro against the dollar but severely penalizing European stock markets.

European stock markets weighed down by bad inflation figures 

After a favorable start to the session, the main stock exchanges of the Old Continent quickly slumped following the publication of disappointing results of inflation in the eurozone.

The flagship EuroStoxx 600 index fell by 0,03%, erasing its initial gains of 0,08%. In Paris, the trend was similar with the CAC 40 retreating by 0,08% to 7,972.26 points, far from its day’s high of 7,982.83 points before the alarming statistic.

In the bond market, yields also tightened. The German 10-year Bund jumped by 4.5 basis points to 2.7%, and its 2-year counterpart climbed by 4.1 bp to 3.121%.

The single currency on conquering ground in the face of the specter of prolonged tightening  

Where investors were hoping for a figure of 6.9%, the eurozone consumer price index rose by 7% year-on-year in April. A figure higher than forecasted, rekindling fears of prolonged monetary tightening by the European Central Bank.

In the wake, the euro strengthened by 0.1% against the greenback, trading at 1.0842 dollars. Traders now anticipate that the ECB will maintain its key rates at high levels for an extended period to curb runaway inflation.

The relentless fight against inflation remains the absolute priority of central bankers, even at the cost of temporarily sacrificing burgeoning economic growth. With such tenacious inflationary pressures, investors will have to arm themselves with patience before hoping for a relaxation of restrictive monetary conditions in Europe.