US inflation and Trump send stock markets tumbling; in Milan (-0.5%), all eyes are on the economic outlook. Wall Street down, DJ -1.87%

(Il Sole 24 Ore Radiocor) - A mixed session for European stock markets, which, after starting the day in positive territory, ended in the red on a day characterised by high volatility. Investor sentiment was dampened by new threats from US President Donald Trump against Iran. According to the tycoon, Tehran has taken too long to negotiate a peace deal and will now “have to pay the price”, describing the Iranian army as “a complete and total disaster” and insinuating that much of it “doesn’t even exist anymore. “Iran is all talk and no action. The Middle East bully is DEAD!!!”, declared the US leader. Speaking to Fox News, the tycoon explained that the US is close to ordering new attacks on Iranian power stations and bridges, given that Iran is ‘making a mockery of the United States’ in the negotiations. Added to this is the US CPI inflation figure, which rose to 4.2% in May, the highest level since April 2023. As a result, Milan closed down 0.46%, Paris down 0.5% and Frankfurt down 0.88%.

Investors’ attention will now turn to the central banks, and in particular to the ECB, ahead of Thursday’s meeting. The expectation is that the ECB will raise interest rates. According to Michael Krautzberger, Global CIO Fixed Income at Allianz Global Investors, “We expect the ECB to raise its key interest rate by 25 basis points to 2.25%, in line with the guidance provided in March and the direction outlined in its 2025 strategic update.”

Wall Street closed lower after President Donald Trump said that negotiations with Iran were dragging on ‘for too long’, threatening further action. The Dow Jones fell by 1.87% to 49,919.21 points, the Nasdaq dropped by 1.98% to 25,169.50 points, whilst the S&P 500 fell by 1.61% to 7,267.58 points.
Shares in the semiconductor sector are once again under pressure, likely ahead of SpaceX’s IPO on Friday: Micron and Qualcomm, for example, are recording significant falls. Some traders believe that investors, particularly small retail investors, are selling some of their shares to make room in their portfolios for the biggest IPO ever. Others, however, believe that the weakness is simply due to profit-taking following such rapid growth.

Meanwhile, on the macroeconomic front in May, consumer prices in the United States rose at a steady pace for the third consecutive month, recording the highest annual rise in inflation in over three years and further reinforcing expectations that the Federal Reserve may raise interest rates by the end of the year. The Consumer Price Index (CPI) rose by 4.2%, the largest year-on-year increase since April 2023, following a 3.8% rise in April. On a monthly basis, it rose by +0.5%. Both figures are in line with expectations. Core figures, excluding energy and food, rose by 0.2% month-on-month (against expectations of 0.3%) and by 2.9% year-on-year (in line with estimates), following 2.8% in April.

On the main Milan stock exchange bank shares continued to dominate the scene, with investors pondering the implications of the bid made for Mps (-0.9%) by Intesa Sanpaolo (-0.9%), agreed with Unipol (+1.53%) and Banco Bpm (+3.96%). The spotlight was also on Unicredit (-1.35%), with investors wondering whether CEO Andrea Orcel is considering any moves to strengthen the bank’s position in the Italian market. Meanwhile, on the German front, it has emerged that the bank based in Piazza Gae Aulenti has increased its stake, via derivatives, to around 54% of Commerbank (-2.16%). Sliding to the bottom of the list are Prysmian (-4.28%) and Stellantis (-4.34%).