The ebullient close on Wall Street and a fall in UK inflation to 2% for the first time since 2021 failed to inspire European markets on Wednesday with shares sliding lower.
Weighing on investor sentiment, on Wednesday the European Commission warned France and Italy that they needed to rein in their budget deficits.
The pan-regional benchmark Stoxx 600 index was down 0.17% at 514.13 points after gains in the previous session. Britain’s FTSE 100 was the exception, moving up 0.17% to 8,205.11.
“The first two days of the week saw the wave of selling in European markets halted, but warnings about fiscal stress in the eurozone have caused traders to hit the sell button once more,” said IG chief market analyst Chris Beauchamp.
“Eurozone governments of all types face a host of challenges, but are unlikely to find popularity if they go down the fiscal austerity route. France’s current troubles could be a template for what’s to come, putting further pressure on European markets.”
Annual UK consumer price inflation fell to 2% in May from 2.3% in April, in line with expectations, according to figures released on Wednesday by the Office for National Statistics.
It marked the first time inflation has hit the Bank of England’s target since July 2021. Inflation peaked at 11.1% in October 2022, hitting its highest level since 1981.
The BoE meets on Thursday with no change in policy expected.
In other economic news, eurozone construction output fell 0.2% in April 2024 compared with the prior month, according to flash estimates from Eurostat, the statistical office of the European Union.
In equity news, the head of Spain’s antitrust watchdog said on Tuesday the government could place extra conditions on BBVA’s €12bn takeover bid for Sabadell. Yet shares in both banks reversed early losses and rose.
Warhammer maker Games Workshop surged 9% as the company posted an upbeat trading statement.
Spectris slumped by as much as 6% at one point as the precision instrumentation and controls group said full-year profits would miss current market forecasts as a result of weaker-than-expected demand at its lab equipment division in the first half.
UK homebuilder Berkeley fell 6% despite lifting its earnings outlook by 5% for the current fiscal year.
Vodafone gained more than 1% as the telecoms operator said it had raised around $1.83bn from the sale of a stake in India’s Indus Towers that it said would be used to repay some of its lenders.