US inflation causes European stocks to open low
FTSE, DAX, and CAC 40 have all been affected by US overprinting of currency.
As the stock market fears that the US Federal Reserve will move more aggressively to constrict monetary policy while the US grapples with inflation, European stock markets have opened lower on Friday.
Although the UK economy saw a 7.5% growth last year after a pandemic recession (the fastest since the second world war!), London's FTSE 100 is down 0.7% at 7,617.19 points. Germany's DAX index lost 0.6% at 15,390.01, while France's CAC 40 lost 0.9% at 7,037.25 points.
Last month, consumer prices in the US jumped 7.5%, which marks the fastest rate in 40 years. This created anxieties that the central bank may be falling behind the curve in terms of containing infaltion.
Fed official James Bullard raised investor concerns by saying that he supports a 50 basis point interest rate lift next month, which is double the usual and the first since 2000, adding that there should even be 2 more after that.
"The Fed hawks came back in charge aggressively following the US inflation print as St Louis (Fed) President Bullard said he'd 'like to see 100 basis points in the bag by July 1'," said Swissquote senior analyst Ipek Ozkardeskaya. "We went from no rate hike in 2022 to the growing possibility of a 100bp hike by July -- which also implies that the first rate hike in March would be no tinier than 50bp," she said.
US stocks had also fallen last month, the worst rates since the 2008 financial crisis.
Federal reserve's printing policy to blame for unprecedented inflation: Investor
Navigator Principal Investors Director Kyle Shostak says the US Federal Reserve's effort to limit massive inflation is at least six months late and is caused by its own money-printing policies.
The Federal Reserve had previously indicated on Wednesday that it would be prudent to raise interest rates soon, owing to inflation exceeding the objective of the central bank by 2%.
The situation has clearly irritated US President Joe Biden, as he sarcastically responded to a Fox News reporter's question on inflation by saying, "It's a great asset - more inflation," before shaking his head and adding, "What a stupid son of a bitch!"
Shostak expressed, "It is a little bit late at this stage to shift gears as they should have done… a half a year ago," referring to the inflation as an "ugly child" of the money-printing policy.
The Director says the US is at risk of experiencing a growth shock, which holds ramifications not only for the US economy but the whole world, noting that the time has passed for the Fed to "contain the rise of the monster it has created."