European Markets Tumble as Investors Weigh on ECB’s Rate Hike

Investors’ concerns about future interest rate increases weighed heavily on European markets on Monday.

The pan-European Stoxx 600 fell 1.22%, with travel and leisure stocks shedding 2% to lead losses as all sectors and major bourses slid into negative territory.

German DAX fell 1.30%, UK FTSE decreased 0.92%, France CAC slipped 1.65%

The decline in sentiment in Europe on Monday follows the region’s major bourses closing in the red on Friday, with investor mood dimmed by the European Central Bank’s confirmation on Thursday that it will raise interest rates by 25 basis points at its July meeting.

The European Central Bank on last Thursday confirmed its intention to hike interest rates for the first time in more than 11 years by 25 basis points at the policy meeting next month, and it expects a further increase at the meeting in September. The ECB also lowered its growth projections.

Inflation in the euro-zone accelerated to an all-time high in May at a fresh record of 8.1 percent rise from a year earlier.

The acceleration was driven by food and energy after Russia’s invasion of Ukraine sent commodity prices soaring. A gauge that excludes volatile items like those rose 3.8 percent.

The ECB expects a further rate raise at the September meeting, although the scale will depend on medium-term inflation outlook.