European Shares Set For Cautious Start As Inflation Worries Weigh

European stocks are seen opening flat to slightly lower on Thursday, as investors fret over the impact of worsening inflation on interest rates, economic growth and corporate earnings.

Markets will remain focused on the ECB policy meeting later today, with the central bank all set to announce an imminent end to its asset purchase program and signal its first-rate hike in over a decade to combat rising inflation.

Traders are now pricing in 75 basis points of increases by September and 130 bps of rate increases by year-end.

The U.S. Federal Reserve is expected to raise its benchmark funds rate by 50 basis points next week and again in July.

The U.S. central bank may need to extend its run of half-point rate rises into September if high inflation doesn’t begin to subside.

Asian markets fell broadly on fears of high inflation leading to a recession.

U.S. bond yields rose and a soaring dollar pushed to a two-decade high against the yen as climbing oil prices stoked worries about rising costs and monetary tightening.

Oil prices held firm near 13-week highs in Asian trade after data showed China’s exports grew at a faster pace in May.

Ahead of the latest U.S. inflation data due out Friday, White House spokeswoman Karine Jean-Pierre said they expect the inflation numbers to be elevated.

U.S. stocks fell overnight, with concerns about slowing growth and prospects of tighter policy measures by the Fed weighing on markets.

As interest rates climb, a measure of U.S. mortgage applications fell to its lowest level in 22 years last week, data showed.

The Dow dropped 0.8 percent, the S&P 500 fell 1.1 percent and the tech-heavy Nasdaq Composite declined 0.7 percent.

European stocks also closed lower on Wednesday following a profit warning from Credit Suisse and downward revisions in global growth forecasts by the World Bank and the OECD.

The pan European Stoxx 600 gave up 0.6 percent. The German DAX and France’s CAC 40 index both declined around 0.8 percent, while the U.K.’s FTSE ended little changed with a negative bias.

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