European stocks closed lower Tuesday, with British opposition lawmakers bidding to seize control of the House of Commons and stop the U.K. leaving the European Union without a deal on October 31.
The pan-European Stoxx 600 was down 0.35% at the closing bell, oil and gas stocks shedding 0.9% to lead losses as most sectors and major bourses ended the session in the red.
Sterling broke below $1.20 on Tuesday morning amid Britain's political uncertainty, sliding as low as $1.1967 to reach its lowest point against the greenback since the October 2016 flash crash. However, it recovered slightly to trade at $1.2088 by the end of the European session as rebel lawmakers applied for an emergency debate in parliament in the hope of thwarting a no-deal Brexit.
If the request is accepted by the House Speaker John Bercow, opposition lawmakers could have a vote on Tuesday evening to wrestle control of parliamentary business away from the government, which would be seen as a de facto confidence vote on Prime Minister Boris Johnson and his Brexit strategy. This could lead to an extension of the Brexit deadline until January 31, 2020.
Government officials on Monday said that Johnson would call for a snap general election on October 14 if a cross-party group of MPs (Members of Parliament), including some rebels from within Johnson's own ruling Conservative Party, succeed with a legislative bill to block a no-deal departure.
Britain's Prime Minister lost his majority in parliament on Tuesday as Conservative lawmaker Phillip Lee defected to the pro-European Liberal Democrat party. Speaking to Sky News on Tuesday afternoon, Lee said Johnson was ignoring expert advice in his approach to Brexit.
In a speech outside 10 Downing Street on Monday, Johnson said hopes of a renewed withdrawal agreement had risen, but reiterated that Britain would not delay its exit from the bloc again.
Johnson would need the backing of two-thirds of the U.K.'s 650 MPs to trigger an election in the fall.
Stocks in the U.S. traded lower on Tuesday, the Dow Jones Industrial Average sliding more than 1% as the U.S. and China began to impose new tariffs on one another's goods.
Back in Europe, Government bonds rallied after Reuters reported, citing sources, that ECB policymakers were leaning toward a stimulus package that consisted of a rate cut and compensation for lenders over the negative side effects of negative interest rates.
Yields on Italian 10-year notes hit a record low of 0.87% on the back of the report.
In corporate news, China has given Deutsche Bank and BNP Paribas "type A" licences allowing them to serve as a lead underwriter for corporate debt issued by non-financial institutions, an industry body under the central bank said on Tuesday.
China has faced pressure to ease its restrictions on foreign banks which have hindered business expansion, and been subject to calls to open its markets further amid an escalating trade war with the U.S.
On the data front, U.K. construction PMI (purchasing managers' index) data missed forecasts by 0.9 points, indicating further drags from political uncertainty. Meanwhile euro zone producer prices inched up in July after four months of decline, due to an increase in energy prices.
Shares of communications company SES fell 3.5% by the end of the session after it announced that CFO Andrew Browne would step down.
French telecoms operator Iliad suffered a 6% drop after first-half results showed it had lost 127,000 subscribers as rivals gained market share.
Danish hospital equipment maker Ambu climbed 7.8% by the closing bell to top the European blue chip index.