Irish shares fall along with eurozone stocks amid inflation fears   

Ryanair chief executive Michael O'Leary. Shares in Ryanair fell by 3.6%.

Eurozone shares fell after data showed inflation rose to a record high in May, spurring bets of bigger interest rate hikes by the European Central Bank. 

Inflation in the 19 countries sharing the euro accelerated to 8.1% in May from 7.4% in April, beating expectations for 7.7% as price growth continued to broaden, indicating that it is no longer just energy pulling up the headline figure. 

The Stoxx index of eurozone shares dropped 1.3% and the pan-European Stoxx-600 index fell 0.7%. 

In Ireland, the Iseq index fell sharply, to close 1.5% lower. Travel and hotel shares, including Dalata and Ryanair fell by 5.5% and 3.6%, respectively.              

"The eurozone's high inflation reading has prompted stocks to reverse course, showing that investors are still very jumpy when it comes to the economic outlook and continued high inflation readings," said Chris Beauchamp, chief market analyst at online trading platform IG.

The euro region's banks, which typically welcome signs of rising interest rates, slid 1.6% as investors worried about the hit to the economy from surging prices.

"This is resulting in market expectations of perhaps ECB acting more quickly," said Bert Colijn, senior economist, eurozone, at ING. However, he added that ING still expects the central bank to hike rates by 25 basis points in July and September.

Investors will closely watch for any change in the ECB's stance after its meeting next week. The central bank has so far signalled that it will begin its interest rate hiking cycle in July, with the rate seen rising to 0% or above by September.

The Stoxx-600 was set to end May down 1.6%, adding to sharp losses earlier this year on concerns over central bank tightening, fallout from the Ukraine conflict and China's tough Covid-19 curbs. 

Reuters and Irish Examiner