European stocks close down 1.01%, US-Iran negotiations hit a deadlock

The US inflation rate exceeds market expectations and hits a new 3-year high, weakening analysts’ expectations of the Federal Reserve cutting interest rates. Coupled with deadlocked negotiations with Iran over ending the war and restoring shipping through the Strait of Hormuz, US stocks retreated on Tuesday, with chip stocks dragging the Nasdaq significantly lower; in Europe, Prime Minister Rishi Sunak’s position in the UK is precarious, political turmoil dampening market investment sentiment, with the pan-European Stoxx 600 index closing down 1.01% at 606 points.

The UK FTSE 100 index closed at 10,265 points, down slightly by 0.04% or 4 points; Germany’s DAX index closed at 23,954 points, down 1.62% or 395 points; France’s CAC 40 index closed at 7,979 points, down 0.95% or 76 points; Italy’s FTSE MIB index closed at 48,990 points, down 1.36% or 673 points; Spain’s IBEX 35 index closed at 17,573 points, falling 1.56% or 278 points.

The US Consumer Price Index (CPI) for April rose 3.8% year-over-year, a 3-year high, with expectations of a 3.7% increase; core CPI rose 2.8% year-over-year, with expectations of a 2.7% increase. Market participants pointed out that the latest inflation data reflects energy price pressures and supply chain disruptions caused by the Iran conflict, which have begun to transmit to US prices.

The ruling Labour Party in the UK suffered a crushing defeat in local elections, sparking internal turmoil. Rishi Sunak faces calls for a leadership challenge, with Interior Minister Shabana Mahmood and other senior cabinet ministers urging Sunak to consider setting a resignation timetable. Over 70 Labour MPs, including government ministers, have called for Sunak to resign or establish a departure schedule. However, Sunak has reiterated that he will not resign.