European stocks fall as markets weigh hot EU Inflation against soft U.S. data

European stock bourses reversed gains once again on Wednesday as investors continued to digest a dense slate of European and U.S. macroeconomic releases.

The pan-European STOXX 600 index dropped 0.5%, reversing an earlier 0.7% advance toward one-week highs. Benchmarks across continental hubs tracked the reversal, with Germany’s DAX and London’s FTSE 100 giving back intraday advances to trade virtually unchanged.

Energy shock drives inflation surges across major economies; U.S. PCE softer-than-expected 

Market sentiment deteriorated sharply after preliminary consumer price data revealed that inflation accelerated far faster than economists anticipated across several of the Eurozone’s largest economies during September, largely driven by the ongoing energy-price shock stemming from escalating Middle East hostilities.

The surge in regional price pressures across Germany, France, Spain and Italy increases the likelihood that the ECB will be forced to raise official interest rates again to prevent high inflation from becoming embedded across the single-currency bloc. 

The flurry of national releases arrives ahead of the unified Eurozone CPI print scheduled for Friday, where economists polled by Reuters expect headline inflation for the bloc to reach 3.6%, up from 3.2% in August.

The retreat in U.S. yields accelerated after the Commerce Department’s August PCE price index - the Federal Reserve’s preferred inflation gauge - came in noticeably cooler than Wall Street estimates across headline and core measures.