European stocks fell on Tuesday after the latest indication that the region’s economy was healthier than expected, leaving scope for central banks to tighten monetary policy.
Europe-wide Stoxx 600 and Germany’s Dax fell 0.8 percent. France’s CAC 40 lost 0.7 percent.
The decline comes after a closely watched survey of private sector activity in the eurozone showed faster-than-expected expansion. Signs of economic resilience could encourage the European Central Bank to raise interest rates further as it tackles high inflation. That will probably increase the euro, but can weigh on the euro zone stock market.
“If we see confirmation that there is an increase in growth it will help the euro,” said Francesco Pesole, forex strategist at ING. “At the same time there are concerns on the geopolitical side restraining risk appetite, like the anniversary of the invasion of Ukraine and speculation about a new attack from Russia.”
ECB governing council member Olli Rehn said on Monday that the ECB will probably meet the terminal level in the summer, but that inflation is “very high”.
“With inflation so high, further rate increases beyond March seem logical, logical and appropriate. . . I assume that we will reach the terminal level during the summer,” he said.
The data also dragged down bond markets, pushing Germany’s 10-year yield up 0.03 percentage points to 2.49 percent. The yield on US 10-year treasuries rose 0.04 percentage points to 3.87 percent.
Futures tracking the blue-chip S&P 500 fell 0.6 percent, and the technology-heavy Nasdaq 100 fell 0.8 percent, showing further losses at the open Tuesday after last week’s decline. US markets are closed on Monday for President’s Day.
The dollar index, which measures the greenback against a basket of six peer currencies, gained 0.2 percent.
Brent crude fell 0.3 percent to $83.80 a barrel, while the U.S. equivalent WTI gained 0.9 percent to $77.
In Asia, the Hang Seng index fell 1.7 percent, while China’s CSI 300 gained 0.3 percent after gaining 2.45 percent on Monday – its best one-day performance since late November. The index is up 6.6 percent this year.