European markets open to close, Fed, inflation data

LONDON — European stocks traded lower on Tuesday as investors watch closely as the euro hovers close to parity with the dollar, and gear up for the latest U.S. inflation reading on Wednesday.

The pan-European Stoxx 600 index was trading almost 0.6% on Tuesday, with the majority of sectors in negative territory apart from utilities and oil and gas stocks.

The euro is being closely followed this morning as it hovers close to parity with the dollar as the euro zone’s energy supply crisis and economic woes continue to depress the common currency.

The euro was trading 0.35% lower at around $1.0004 at 9:15 a.m. London time on Tuesday morning.

EDF was the best performer on the index, its shares up 5.9%, after two sources told Reuters that the French government was poised to pay more than 8 billion euros ($8 billion) to bring the power giant back under full state control. The French government announced last week that it would nationalize the company. It already owns 84% of the firm.

The worst performer on the index was Swedish cloud communications company Sinch, down almost 20% as it extended losses seen on Monday, after it said its second quarter profit will be hit after it reassessed historical cost of goods sold, Reuters reported.

Oil and gas stocks were volatile Tuesday morning, veering between positive and negative territory as investors weighed the risks regarding gas supplies to Europe after Russia suspended deliveries of gas to Germany via the Nord Stream 1 pipeline while it undergoes its annual summer maintenance.

The planned maintenance of the pipeline has stoked fears that Russia could lengthen the work and further delay gas supplies to Germany.

General negative sentiment in European markets comes as investors prepare for more key inflation data out of the U.S. this week.

The June consumer price index is expected to show headline inflation, including food and energy, rising above May’s 8.6% level.

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Market participants have been reflecting on a stronger-than-expected jobs report out of the U.S. last Friday which showed that the economic downturn worrying investors has not yet arrived.

The jobs report, while good for the economy, could embolden the Federal Reserve to continue its aggressive rate hikes in the coming months to fight persistently high inflation. It will be tested with a slew of U.S. earnings from major banks and the latest consumer inflation reading coming up this week.

There are no major earnings releases in Europe on Tuesday. Data releases include the ZEW economic sentiment index for July from Germany.

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