LONDON — European stocks fell on Thursday ahead of the European Central Bank’s latest interest rate decision.

The pan-European Stoxx 600 fell 0.7% in early trading, with basic resources shedding 1.6% to lead losses, with all sectors trading in negative territory except Oil & Gas, which increased slightly by 0.2%.

In terms of individual stock price movement, Swedish helmet company MIPS fell more than 7% to the bottom of the European blue chip index after updating its financial targets. Topping the Stoxx 600, French utility EDF gained 5% after a media report on government plans to nationalize the company.

European markets are focused on the upcoming monetary policy meeting and ECB decision on Thursday. The central bank is expected to confirm its intention to raise interest rates next month. The move comes after inflation in the 19-member eurozone hit a new high in May.

Investors will follow ECB President Christine Lagarde’s press conference after the meeting to gauge how aggressively the bank might act.

Asia-Pacific stocks were mixed on Thursday as investors watched the market’s reaction to China’s trade data for May, which beat expectations. Meanwhile, U.S. stock futures fell in early pre-market trade on Thursday after major averages ended the regular session lower and U.S. Treasury yields rose.

“People are realizing that, of course, companies can start to pass on costs and that price increases in general have been much higher than they have been before, but their costs are going up and the worry is that costs are going to keep going up, because then it’s going to be harder for them to keep pushing those prices up. I think that’s one of the reasons we’ve seen such downward pressure on stocks.

Randall Kroszner

Professor of Economics, University of Chicago

Investors in the United States continue to look for signs of slowing economic growth ahead of May’s consumer price index reading, which is scheduled for Friday. The data is expected to be slightly lower than the April figures and could indicate that inflation has peaked.

Thursday’s negative start to trading continues a general downward trend for markets as inflation and growth fears continue to depress investor sentiment.

Randall Kroszner, a University of Chicago economics professor and former Federal Reserve governor, told CNBC on Thursday that inflation and rising employment costs were starting to hurt businesses, leading to a recent “stock market revaluation”.

“People are realizing that, of course, companies can start to pass on costs and that price increases in general have been much higher than they have been before, but their costs are going up and the worry is that the costs are going to keep going up, because then they’ll have a harder time keeping those prices up. I think that’s one of the reasons we’ve seen such downward pressure on stocks,” he said. Kroszener told CNBC’s “Squawk Box Europe.”

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