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European stock markets slump as eurozone inflation hits 13-year high

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European stock markets slump as traders look to eurozone GDP data
France was the first in a string of GDP figures expected on Friday, delivering a surprise 3% growth in the third quarter, and beating expectations due to a rise in consumer spending and exports. Photo: Joel Saget/AFP via Getty

European stock markets tumbled into the red on Friday as eurozone inflation rocketed to its highest level since July 2008.

In London, the FTSE 100 (^FTSE) fell 0.1% on day, while the French CAC (^FCHI) ended 0.2% higher, managing to reverse losses earlier on, and the DAX (^GDAXI) was 0.2% lower in Germany.

Inflation in the bloc soared past analysts’ expectations to 4.1% this month, up from 3.4% in September according to Eurostat data. This was also well ahead of forecasts of 3.7%.

It was driven by rising energy costs, tax increases, and growing price pressures as a result of the ongoing supply chain crisis.

It came as the eurozone economy grew at its fastest pace in a year between July and September, as COVID-19 restrictions were eased across the region.

According to Eurostat, eurozone GDP increased by 2.2% quarter-on-quarter, representing a 3.7% year-on-year increase. Standout performers were Austria and France, with the latter delivering a surprise 3% growth in the third quarter, and beating expectations due to a rise in consumer spending and exports.

Read more: ECB's Lagarde says period of higher inflation will last longer than expected

Italy and Germany also added to the increase in the output, while Spain posted lower numbers than expected.

French finance minister Bruno Le Maire hailed an "exceptional result" that showed the economy was heading in the right direction. 

"Jesús Cabra Guisasola, associate at Validus Risk Management, said: “Longer-term, we remain cautious around the recovery of the eurozone with inflation pushing higher as result of the spike in commodity prices, which could undermine consumption, and the disruption in the supply chain.” 

Across the pond, the S&P 500 (^GSPC) dipped 0.05% and the tech-heavy Nasdaq (^IXIC) fell 0.2% by the time of the European close. The Dow Jones (^DJI) edged 0.2% higher.

It came as US inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, stayed unchanged at 0.3% on a monthly basis in September.

According to the US Bureau of Economic Analysis on Friday, the PCE Price Index edged higher to 4.4% from 4.2% on a yearly basis, but came in lower than the market expectation of 4.7%.

It also followed disappointing earnings from Amazon (AMZN) and Apple (AAPL), who both blamed higher costs, and supply chain disruptions.

Apple and Amazon fell in extended trading, signalling a more than $200bn (£144bn) drop in combined market value when the US reopens. This overshadowed upbeat views on company performance that earlier took Wall Street to a record close.

Watch: Amazon stumbles after earnings miss

US economic data was a mixed bag yesterday, as weekly jobless claims continued to fall back, pulling continuing claims down to their lowest levels since the beginning of March 2020, at 2.24 million.

However, Q3 GDP slowed sharply from 6.7% the previous three months to 2%, as rising Delta infections hammered consumer confidence and crimped economic activity during the quarter.

Asian stocks were mixed overnight as traders weighed bond-market gyrations on concerns over inflation and monetary tightening.

In Japan, the Nikkei (^N225) climbed 0.3% while the Hang Seng (^HSI) fell 0.8% and the Shanghai Composite (000001.SS) gained 0.8%.

Debt-laden Chinese real estate developer Evergrande (3333.HK) has reportedly made an interest payment on an offshore bond ahead of the deadline for a grace period.

Watch: What is inflation and why is it important?

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