European stocks fall ahead of US inflation data

European stocks fell at the open on Tuesday as traders turned cautious ahead of the release of US economic data likely to inform the Federal Reserve’s future decisions on interest rates.

Europe’s region-wide Stoxx 600 benchmark fell 0.3 per cent in the first hour of trade and France’s CAC fell 0.4 per cent.

Meanwhile, contracts tracking Wall Street’s benchmark S&P 500 and the Nasdaq were both down 0.2 per cent ahead of the New York open.

The Bureau of Labor Statistics will publish its latest US consumer price index report on Wednesday, which is expected to show headline consumer price inflation at an annual rate of 5 per cent in April, unchanged from the previous month, according to economists surveyed by Bloomberg.

The figures are likely to influence the Fed’s future path for monetary policy, after it last week raised interest rates to a range of 5 per cent to 5.25 per cent, its 10th increase in 14 months.

A series of stronger than forecast US economic data in the past two months has raised doubts over whether the Fed will begin to cut interest rates as soon as investors had expected.

London’s FTSE 100 was flat after it reopened following a public holiday. Traders were also looking ahead to a policy meeting from the Bank of England on Thursday, in which the central bank is expected to raise interest rates by 0.25 percentage points to 4.5 per cent, its highest level since 2008.

Economic data on Tuesday showed in the UK’s retail sales as consumers continued to tighten their budgets in response to rising prices. Markets anticipate UK rates will hit 4.75 per cent by the end of the year.

US government bond prices rose, with the yield on interest rate sensitive two-year Treasuries down 0.03 percentage point at 3.98 per cent, following a sell-off on Friday. Yields move inversely to prices.

The US dollar index rose 0.2 per cent against a basket of six other currencies.

Hong Kong’s benchmark Hang Seng index fell 2.1 per cent, while China’s CSI 300 was down 0.9 per cent. Japan’s Topix stood out from the rest of the region, rising 1.3 per cent.