European stocks and US futures fell on Tuesday, as traders grew cautious following downbeat corporate news and ahead of key inflation data likely to inform the Federal Reserve’s future interest rate decisions.
Europe’s region-wide Stoxx 600 benchmark fell 0.7 per cent, while contracts tracking Wall Street’s benchmark S&P 500 and the Nasdaq were both down 0.4 per cent ahead of the New York open.
European stocks were dragged down by a 2.1 per cent drop in the real estate sector, with shares in Swedish landlord SBB falling 12.6 per cent as the biggest faller on the regional index. SBB on Monday halted its dividend payments, after S&P Global downgraded its credit rating to junk.
The real estate move is led by “the view that weakness in Sweden’s property sector is foreshadowing what is set to come in mainland Europe”, said Simon Harvey, head of FX analysis at Monex Europe.
France’s Cac 40 fell 0.9 per cent, while Germany’s Dax was down 0.3 per cent.
London’s FTSE 100 fell 0.5 per cent as traders awaited the Bank of England’s next policy meeting on Thursday when the central bank is expected to raise interest rates by 0.25 percentage points to 4.5 per cent, their highest level since 2008.
Economic data on Tuesday showed a slowdown in the UK’s retail sales as consumers continued to tighten their budgets in response to rising prices. Markets anticipate UK rates will hit 4.75 per cent by the end of the year.
Shares in the UK insurer Direct Line slipped 5 per cent after the company warned on Tuesday that high inflation had pushed up claim costs.
The US Bureau of Labor Statistics will publish its latest consumer price index report on Wednesday, which is expected to show headline consumer price inflation at an annual rate of 5 per cent in April, unchanged from the previous month, according to economists surveyed by Bloomberg.
The figures are likely to influence the Fed’s future path for monetary policy, after it last week raised interest rates to a range between 5 and 5.25 per cent, its 10th increase in 14 months.
A series of stronger than forecast US economic data in the past two months has raised doubts over whether the Fed will begin to cut interest rates as soon as investors had expected.
US government bond prices rose, with the yield on interest rate-sensitive two-year Treasuries down 0.04 percentage points at 3.97 per cent, following a sell-off on Friday. Yields move inversely to prices.
The US dollar index rose 0.1 per cent against a basket of six other currencies. Brent crude, the international oil benchmark, fell 0.8 per cent to $76.35 a barrel.
Hong Kong’s benchmark Hang Seng index fell 2.1 per cent, while China’s CSI 300 was down 0.9 per cent. Japan’s Topix stood out from the rest of the region, rising 1.3 per cent.
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