European stocks slid to a seven-month low today after US core inflation prices rose more sharply than expected, raising concerns about the pace of interest rate rises.
US core consumer prices which strip out energy and food costs rose by an unexpectedly steep 0.3 per cent for a third straight month. Wall Street had expected the core rate to rise just 0.2 per cent.
The FTSEurofirst 300 index was down 0.6 per cent at 1,231.7 points by 1:35pm (Irish time), its lowest since mid-November 2005, tracking US stock futures which erased their gains after the May consumer prices report.
"The CPI report was the same catalyst that hit markets about a month ago, and the number has again disappointed today," said a trader. "It increases the likelihood of the Fed raising rates."
Around Europe, London's FTSE 100 index lost 0.6 per cent, Paris's CAC 40 slipped 0.8 per cent and Frankfurt's DAX fell 0.5 per cent. Rising rents pushed up US core prices an unexpectedly steep 0.3 per cent for a third straight month, according to a government report.
Federal Reserve Chairman Ben Bernanke said last week that the acceleration in core inflation over the past three to six months was "unwelcome" and he pledged the central bank would remain "vigilant" to ensure it was not lasting.
The tough talk on inflation, buttressed by warnings from other central bank officials, helped fuel expectations for a 17th consecutive interest-rate increase at the Fed's next policy-setting session on June 28-29 th.