Euro zone inflation up, pushing rate hike speculation
European stocks started the day strong but lost momentum, as inflation data from Eurostat revealed a rise in annual consumer prices to 2.9% in July, up from 2.8% the previous month. This increase was driven by higher energy costs. The euro remained near multi-week highs against the dollar, reinforcing speculation that the European Central Bank might raise interest rates in September. Economists had expected the increase, and it is now at a similar level to the inflation rate in Germany, where prices jumped from 2.3% in June to 2.8% in July compared to the same month last year.
In France, preliminary data from INSEE showed consumer price inflation accelerating to 2.1% in July, compared to 1.8% in June. Economists had anticipated inflation to stay steady at 1.8% during the same period. The data suggests a similar trend across the region. Inflation was highest year-on-year in Lithuania (5.6%), Bulgaria (4.1%), and Cyprus (4.0%), while the lowest increases were recorded in Estonia (2.0%), Malta (2.1%), and France (2.4%).
U.K. property market slows due to rate hike fears
In the U.K., house prices saw a slower annual increase in July, rising 1.8% compared to 2.2% in June. According to data from Nationwide Building Society, growing geopolitical tensions and uncertainty over potential interest rate hikes have reduced buyer confidence. The market had predicted a 1.9% annual rise, but actual results fell short.
The pan-European STOXX 600 Index began the day with a strong 1% surge, but the momentum faded. By the close, the index ended at 649.19, down 0.1%. Meanwhile, the FTSE 100 in the U.K. dipped 0.3%. Germany's DAX Index managed a slight 0.1% gain, and France's CAC 40 added 0.3% to its total.
Mixed performances across sectors
Hensoldt, a German company specializing in sensor and radar systems, saw its shares fall by 5% as traders took profits following a recent rally. Puma, the sportswear maker, also declined sharply due to disappointing second-quarter sales. Melrose Industries, which owns GKN Aerospace, dropped significantly after warning of unexpected costs tied to a chemical tank incident at its U.S. facility.
Not all companies struggled, however. Saint-Gobain, a French construction and materials company, soared nearly 7% after confirming its 2026 guidance. Engie, a utility provider, climbed 4% following a better-than-expected first-half earnings report. Credit Agricole, a major lender, also rose 4% after posting strong second-quarter results. Swiss chemical firm Clariant also experienced a sharp rise in share prices, as its earnings beat forecasts.