European stocks slide as traders weigh inflation outlook

European stocks edged lower on Tuesday as economic data will show how much inflation is holding the economy.

The regional Stoxx 600 was down 0.4% in early trade after closing the previous session up 0.6%. Germany’s Dax fell 0.7%.

The moves come ahead of Tuesday morning’s release of euro zone inflation data, which is expected to show consumer price growth in the bloc hit a new high of 7.7% in May – leading market participants to question how far the ECB will go Tighter monetary policy in response. German inflation hit a record 8.7 percent last month, data released on Monday showed.

However, ECB chief economist Philip Lane said this week that a quarter-point rate hike in July and September would be The central bank’s ‘benchmark pace’and noted that the process of withdrawing from stimulation “should be gradual.”

Elsewhere, Hong Kong’s Hang Seng rose 0.8% after data showed Chinese manufacturing activity contracted at a slower pace in May than the previous month. The official manufacturing purchasing managers’ index rose to 49.6 from 47.4 in April. Any reading below 50 indicates contraction.

On Monday night, Shanghai also announced a partial easing of coronavirus lockdown restrictions.

In the government bond market, German 10-year bond yields – seen as a proxy for borrowing costs across the euro zone – held steady after a fresh sell-off on Monday.

Meanwhile, U.S. debt came under pressure after the country’s stock and bond markets were closed for a holiday on Monday. The yield on the 10-year U.S. Treasury note rose 0.07 percentage point to 2.82% as the price of the benchmark instrument fell.

Wall Street stock futures edged lower in early European trade, snapping a seven-week losing streak on Friday.

In commodities, Brent crude rose 1.4% to $123.31 a barrel. EU agrees to ban Imports of most Russian oil. On Monday, the international oil benchmark climbed above $120 a barrel for the first time since March.

The U.S. dollar index, which measures the greenback against a basket of six currencies, was flat, while the euro and pound fell 0.4% and 0.3%, respectively.

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