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The pan-European Stoxx Europe 600 stock index and London’s FTSE traded essentially flat for the week ending 17 September, with Germany’s DAX slipping 1 percent and the French CAC managing a 0.3-percent gain.
Markets were stymied by inflation, MarketWatch said, which rose to 3 percent in August from 2.2 percent in July to reach its fastest pace in 10 years.
Shares of several mining companies sank after UBS downgraded the outlook for them.
Iron ore prices will slide below $100 per ton later this year as China cuts back steel production and the country’s property market continues to soften, UBS predicted.
Half of inflation’s quickening pace was attributed to rising energy costs in the face of a natural gas shortage, although prices for alcohol, food, industrial goods, services, and tobacco also moved up.
“Soaring natural gas and electricity prices have fueled ‘stagflation’ fears in the market,” analyst Aila Muhr at Danske Bank, wrote in a note to clients, adding that energy-price inflation will be a factor for at least the rest of this year.
Across the continent, consumers are protesting the relentlessly rising price of natural gas in the face of supply slowdowns by Russia—a major source of Europe’s gas—and too little wind and rain to keep up renewable wind power and hydropower.
The European Central Bank (ECB) expects inflation’s rate to slow to 2 percent by 2025.
That could presage an interest rate hike in 2024, according to the bank’s private internal models cited by the Financial Times (see related story).
The FT also reported that ECB chief economist Philip Lane discussed a possible 2023 rate hike with German banks last week; the ECB declined comment, the FT said.
TREND FORECAST: The ECB’s expectations for inflation to slow to 2 percent by 2025, is pure bullshit. There is no way anyone can forecast the inflation flow four years from now.
Instead, they are selling the line to ease fears that inflation will continue. Indeed, absent from their prediction is where will the euro be in 2025? Trading at 1.1723 against the dollar, the euro is down from its 2021, 1.2325 high.
Thus, the lower the euro goes and the higher prices rise, the more it costs to purchase goods, which in turn means spiking inflation.