Stocks worldwide experiencing a halt in growth as U.S. bond yields increase
European Stocks Slowed Down Amidst Stronger-Than-Expected US Inflation
European stocks experienced a slowdown on Tuesday, as concerns over persistent US inflation prompted investors to reconsider their expectations for interest rate cuts by the Federal Reserve. This came after the US wholesale price inflation data showed a larger-than-expected surge in July 2025.
The FTSE 100 in Britain remained essentially flat, while the FTSE 250 index decreased by 0.2%. The energy sector was the main drag on the FTSE 100, decreasing by 1.3%. Harbour Energy led the losses in the energy sector, falling by 4.5%. Oil majors Shell and BP decreased by 1.5% and 0.9% respectively. Industrial metal miners retreated due to weakness in copper and iron ore prices, with Rio Tinto down by 4% and Anglo American down by 1.7%.
However, not all stocks followed the downward trend. Aviva, a British insurer, rose by 2.4% after reporting a stronger half-year operating profit and increasing its interim dividend. British Gas owner Centrica rose by 2.5% after announcing it will jointly buy National Grid's Grain LNG terminal. Cairn Homes increased by 2% due to new plans for 236 apartments and 16 houses. British insurer Admiral hit a record high, increasing by 5.8% after a strong first-half profit.
Meanwhile, US bond yields rose as inflation expectations increased and investors demanded higher yields to compensate for the eroding purchasing power of fixed income returns. A hotter inflation reading reduces the appeal of bonds and typically leads to higher yields.
In Dublin, the Iseq index rose by 1.1%. AIB climbed 3.4% and Bank of Ireland jumped 2.1%. Ryanair advanced by 0.6% and Glanbia added another 1.4%.
In New York, Wall Street's main indices were little changed despite a stronger-than-anticipated inflation reading. US wholesale inflation accelerated in July by the most in three years, causing traders to trim bets on the Federal Reserve cutting interest rates next month.
Thyssenkrupp, a German conglomerate, tumbled 8.9% due to reduced full-year outlook for investments and sales. Carlsberg, a Danish brewer, fell 5.5% due to missed half-year profit and volume forecasts. Swiss Re, an insurer, reported better than expected net profits but fell 3.9% in Europe.
In summary, the stronger-than-expected US wholesale inflation data suggested persistent inflation pressures, raising concerns about tighter US monetary policy, which slowed European stocks and pushed up US bond yields. This inflation surprise caused European stocks to slow down, as investors became concerned that persistent US inflation would prompt the Federal Reserve to delay or avoid expected interest rate cuts, which are critical for supporting global economic growth and equity markets.
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