European Stocks Plunged Due to a Combination of Factors

European stocks fell on Tuesday. They declined as traders monitored heavy selling in the banking sector as well as U.S. inflation data, and looked ahead to key central bank meetings.

The pan-European Euro Stoxx 600 index fell 1% in early afternoon trade after clawing back some earlier losses. The German DAX declined 0.3% with the banking sector falling 1%. 

Reports on Monday indicated that an unnamed investor sold large stakes in Germany’s biggest lenders, Commerzbank and Deutsche Bank. Shares of Commerzbank were down 7.5% and Deutsche Bank was down 8.3%. 

Investors are also closely monitoring the situation in Ukraine. Russia’s invasion of Ukraine caused volatility in oil and other commodities markets, which has, in turn, disturbed stocks. 

On Monday, U.K.’s Foreign Secretary Liz Truss said her government was working “urgently” to verify details of an alleged chemical weapons attack in the city of Mariupol.

U.S. stocks and inflation

U.S. stocks strengthened their positions on Tuesday as the March consumer prices report showed inflation excluding volatile food and energy costs was slightly less than expected. People should keep in mind that a drop in rates helped to boost stocks.

The Dow Jones Industrial Average added 241 points, or 0.7%, following the report. Moreover, the S&P 500 jumped 1.9%, after falling more than 2% in the prior session as tech stocks that have been hit hard this year on higher rate fears rebounded.

Based on the information provided by the Labor Department, consumer prices for March rose 1.2% month-to-month and 8.5% annually. However, traders were focusing on the core reading, which excludes food and energy prices. The core consumer price index in March rose 0.3%. Besides, core prices on an annual basis were up 6.5%.

The 10-year Treasury yield fell from a three-year high following the report. It declined as traders were betting the core reading could mean inflation is showing signs of peaking.