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European markets hit three-month lows due to inflation shock.

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On Monday, European stocks fell to three-month lows, led by technology and travel stocks, as a sharp rise in US inflation raised concerns about the Federal Reserve’s aggressive interest rate hikes.

The STOXX 600 index (.STOXX) in Europe plummeted 1.9 percent to its lowest level since March 8.

As government bond yields hit multi-year highs on forecasts of a faster tightening of monetary policy, high-growth technology companies (.SX8P) led the morning losses, with economy-linked sectors like as travel & leisure (.SXTP) and automakers (.SXAP) also losing more than 3%.

After a strong sell-off on Wall Street on Friday, statistics indicated that consumer prices in the United States rose 8.6% in May, the most gain since 1981, prompting fears of a larger 75-basis-point rate hike at the Fed meeting this week.

“We have a lot of uncertainty… less growth, greater inflation, and concerns about central banks slamming on the brakes,” said Rabobank senior market analyst Elwin de Groot.

“What we’re seeing now in the market is that fears are beginning to feed on themselves.”

Fears of surging inflation, central bank policy tightening, and recent COVID-19 limits in China have all contributed to the STOXX 600 losing over 17 percent since hitting a record high in January.

Concerns about more COVID lockdowns pushed Asian stocks lower, with Beijing’s most populous neighborhood of Chaoyang announcing three rounds of mass testing to combat a “ferocious” coronavirus epidemic that broke out at a bar.


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