On Thursday, there was a rise in European shares thanks to a boost in oil stocks, but they were lagging in other major markets.
This was because inflation in the euro zone in July reached a record high and officials of the European Central Bank (ECB) hinted that there could be another major interest rate hike in the next month.
The pan-European STOXX 600 index climbed 0.4% for the day, thanks to a gain of 1.7% recorded in energy stocks after there was an increase in crude futures by more than $1.
Market analysts said that there had been a welcome increase in gas and oil stocks after crude prices had weakened for some time.
There was a 0.1% month-on-month increase in consumer prices in the euro zone, which resulted in an 8.9% year-on-year increase in July.
This is the highest increase to have been recorded since the euro had been created back in 1999. Of the total increase, almost 4.02 percentage points had been contributed by energy alone.
The costs of energy in the euro zone have gone up since Russia’s military invasion of Ukraine.
Isabel Schnabel, a member of the ECB board, said earlier that the inflation outlook of the region had not shown any improvement since they had hiked the interest rate in July.
She also suggested that there could be another big increase in the coming month. After these comments, the 10-year German bond yields rose by 5 basis points to an almost four-week high.
Martins Kazaks, the Governing Council member, put forward the same views as Schnabel in a different interview.
The minutes of the US Federal Reserve’s July meeting were also released on Wednesday, which did not offer much comfort about the pace of rate hikes in the US.
Market analysts said that the ECB has to catch up with other central banks, but they cannot opt for the same pace because of the Transmission Protection Instrument (TPI).
This means that if they increase borrowing costs too quickly, it could lead to a debt crisis. This bond purchase scheme is designed to help euro zone countries that are more indebted.
A rate increase of 50 basis points by the ECB has been priced in by money markets for September and there is also a 35% possibility that the hike could be about 75 basis points.
Meanwhile, there was an increase in interest rates of 50 basis points by the central bank of Norway and it added that there were more interest rate hikes to come.
As far as stocks are concerned, there was an 8.3% drop in Rockwool, as rising energy prices pushed the stone-wool manufacturer to cut its margin guidance for 2022.
There was also a 3.7% drop in Ayden after the Dutch payment processor fell short of its earnings expectations for the first half of the year.
A 15.7% jump was also recorded in Siegfried, as the Swiss pharmaceutical giant managed to exceed first-half expectations and also increased its outlook for the year.