European Stocks Tumble in Tandem with Dow on Hot Inflation Data

European stocks are seeing a mildly bearish turn on Tuesday as the United States Bureau of Labor Statistics (BLS) released the key inflation data for the month of August. With the inflation coming in at 8.3% for the month, investors are taking a conservative approach to the market, exiting their positions in hopes not to get into the crosshairs of harsh monetary tightening.

The pan European STOXX 600 (INDEXSTOXX: SXXP) dropped 0.13% to 420.58, while the German DAX PERFORMANCE-INDEX (INDEXDB: DAX) recorded a 0.28% drop to 13,151.95 to complement the fall in basic resources and energy stocks both of which slipped by 1%.

The drop in the European stock market is in tandem with those of the US stock market which saw the Dow Jones Industrial Average (INDEXDJX: .DJI) fall 3.94%, or 1,276.37 points to end Tuesday’s session at 31,104.97. This level comes off as the worst level the Dow experienced since June 2020.

The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) slumped 5.16% to 11,633.57. The S&P 500 Index (INDEXSP: .INX) was not spared from the onslaught as the broader index slumped 4.32% to 3,932.69.

“I think we may even go back and retest the June lows,” UBS director of floor operations Art Cashin said Tuesday on CNBC’s “Squawk on the Street.” Adding he noted that “Certainly the 3900 is just so tempting, and you’re pulling back below the 50-day moving average here. It’s very much about the technicals. It’s not so much that the one number made the economy go topsy-turvy. It meant a lot of guys who were making preliminary favorable bets got caught off base.”

European and American Stocks Decline: Industry Preps for More Interest Rate Hikes

Every major industry stakeholder is now preparing for at least a 75 basis point interest rate hike with many betting on the fact that the Feds may push this to a 100 basis point. The hot inflation data, though fairly reduced from the 8.5% recorded in July, has shown that the Fed’s move to curb inflation is not as effective as initially projected.

The plan is to return this inflation to the 2 to 4% range, an allowance that will ease life for Americans who will no longer need to spend more to acquire the basic items needed for survival including food and fuel. As far as the Fed is concerned, the interest rate may continue to be hiked until the desired result is obtained.

The broad-based decline in the financial markets also trickled down to the digital currency ecosystem with the combined digital currency market cap falling below the $1 trillion psychological level.

Bitcoin (BTC) is changing hands at $20,350.75, down 8.77% in the past 24 hours per data from CoinMarketCap. Despite the anticipation for the upcoming merge, Ethereum (ETH) has also recorded a massive slump of 6.86% to $1,600.53. Other top altcoins also recorded significant losses as previous gains in the crypto market were erased.

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