European stocks close mixed as U.S. inflation surges; ECB holds steady

LONDON — European stocks closed mixed Thursday as traders digested new U.S. inflation data a monetary policy decision from the European Central Bank.

The pan-European Stoxx 600 closed marginally higher, with the major bourses struggling for direction. In terms of sectors, telecoms stocks rose 1.2% while travel shares slipped 1.2%.

Global markets were predominantly focused on the U.S. inflation data on Thursday, with May’s consumer price index coming in 5% higher year-over-year, the Labor Department revealed.

Economists polled by Dow Jones had expected the May CPI report to show prices up 4.7% year over year after April’s increase of 4.2%.

The Federal Reserve has been trying to gauge if higher price pressures are just temporary as the economy continues to rebound from the pandemic-induced recession.

On Wall Street, U.S. stocks climbed with the S&P 500 hitting a new all-time high as investors shrugged off the bigger-than-expected increase in price pressures.

For weeks, investors have been worried whether a rash of inflation could prompt the Fed to curb the pace of its asset purchases or begin to signal an increase to interest rates. Still, some say those fears are premature and that the central bank will give markets plenty of time before it makes any moves.

Back in Europe, the European Central Bank opted to keep interest rates and asset purchases unchanged on Thursday, despite the recent overshoot of its inflation target.

“Leading up to the ECB meeting, there had been questions on whether the ECB would slow down the pace of purchases under its Pandemic Emergency Purchase Programme (PEPP),” said Xian Chan, chief investment officer for wealth management at HSBC.

“However, higher bond yields and a strong Euro have meant that financial conditions have tightened over the past few months, and this likely encouraged the ECB to maintain the high pace of stimulus to keep financial conditions loose. Also, the existing scope of the programme continues to give the ECB room to carry on its current trajectory of purchases.”

Read more: ECB leaves rates and bond buying unchanged despite inflation uptick

In other news, U.K. Prime Minister Boris Johnson met with U.S. counterpart Joe Biden on Thursday ahead of the start of the Group of Seven summit in Cornwall that begins on Friday.

In terms of individual share price movement, BT rose to the top of the Stoxx 600, climbing 6.6% after French telco Altice said it was taking a 12% stake in the company.

British car trading service Auto Trader, meanwhile, climbed 6.5% after a strong earnings report.

Enjoyed this article?
For exclusive stock picks, investment ideas and CNBC global livestream
Sign up for CNBC Pro
Start your free trial now

– CNBC’s Ryan Browne, Thomas Franck and Annette Weisbach contributed to this market report.