European equities slipped on Tuesday as a six-day rally in oil prices and growing caution over U.S. inflation data weighed on investor sentiment.
The pan-European STOXX 600 index was down 0.3% by mid-morning in London, tracking losses in major regional bourses. London’s FTSE 100 fell 0.4%, while Germany’s DAX and France’s CAC 40 each declined 0.2%. Energy shares led declines, reflecting the drag from higher crude prices, which have climbed for six consecutive sessions.
The rise in oil prices, driven by supply concerns and robust demand, has raised concerns about its potential to stoke inflationary pressures. Investors are also bracing for U.S. consumer price index (CPI) data due later this week, which could influence the Federal Reserve’s policy path. A stronger-than-expected inflation reading may delay expected interest rate cuts, tightening financial conditions.
Analysts noted that the market’s sensitivity to inflation risks has increased as central banks, including the European Central Bank, signal a cautious approach to monetary easing. "The combination of higher oil prices and sticky inflation expectations is creating a headwind for equities," said a strategist at a major European bank.
Oil prices extended gains after OPEC+ agreed to maintain production cuts through the second quarter, supporting prices despite concerns over global demand. Brent crude futures rose 0.7% to $87.40 a barrel, while U.S. West Texas Intermediate (WTI) climbed 0.6% to $83.10.
The STOXX 600’s energy sector was the worst performer, down 1.1%, as higher fuel costs eroded corporate margins. Utilities and consumer staples also lagged, while technology shares showed relative resilience with a modest gain of 0.1%.
Market focus remains on Friday’s U.S. CPI release, which will provide fresh insight into inflation trends. Any upside surprise could reinforce bets on a prolonged period of higher-for-longer interest rates, further pressuring equity valuations.
The euro was little changed against the dollar at $1.0830, while the yield on Germany’s 10-year bund edged up to 2.45%, reflecting cautious bond market sentiment ahead of key data.
