European markets close lower as investors look ahead to U.S. inflation data

The Bank of England accepted all 2.3754 billion pounds ($2.63 billion) of long-dated conventional gilts which it was offered at its reverse auction, a record sum as the temporary purchase programme approaches its end.

The volume of gilts the BoE bought was the highest at any daily reverse auction since the programme started on Sept. 28, although the total sum offered was well below the 5 billion pounds which the BoE said it was prepared to buy.

Earlier on Wednesday the BoE said it bought 1.9798 billion pounds of index-linked gilts.

— Reuters

Shares of Danish bioscience company Chr. Hansen jumped more than 13% by mid-afternoon, after a robust quarterly earnings report and promising outlook.

At the bottom of the Stoxx 600, Philips shares slumped more than 9% after the Dutch health tech firm issued a third-quarter profit warning and highlighted a 1.3 million euro ($1.26 billion) charge for its embattled sleep and respiratory care business.

- Elliot Smith

The turmoil in U.K. gilt markets spilled over into the euro zone on Wednesday, with euro zone government bond yields rising sharply after the Bank of England confirmed the end of its emergency bond-buying program on Friday.

The 10-year German bund yield was up 8 basis points to 2.3880% during afternoon trade in Europe, having earlier notched its highest point in more than a decade, while Italian 10-year BTP yields also jumped. Yields move inversely to prices.

U.K. 30-year gilt yields were up by around 16 basis points at 4.963% while the 10-year yield was up by more than 9 basis points at 4.533%.

- Elliot Smith

Samy Chaar of Lombard Odier says "it's very easy to say that pension funds have to get their act together," but they would need a functioning gilt market with liquidity to do so.

Shares of Danish bioscience company Chr. Hansen jumped more than 11% in early trade after a robust quarterly earnings report and promising outlook.

At the bottom of the Stoxx 600, Philips shares slumped more than 11% after the Dutch health tech firm issued a third-quarter profit warning and highlighted a 1.3 million euro ($1.26 billion) charge for its embattled sleep and respiratory care business.

- Elliot Smith

The British pound on Wednesday morning recovered losses following a Financial Times report that said the Bank of England is privately signaling a willingness to extend its emergency bond-buying program.

The report, citing anonymous sources, appeared to contradict comments from Bank of England Governor Andrew Bailey, who told pension fund managers at an Institute of International Finance event on Tuesday that they had three days to finish rebalancing their positions.

The pound was back above $1.10 during early trading hours in London.

Read the full story here.

- Elliot Smith & Abigail Ng

U.K. GDP contracted by 0.3% month-on-month in August, the Office for National Statistics said Wednesday, below expectations for stagnation from a Reuters poll of economists.

The fall in activity was driven partly by manufacturing weakness and maintenance work on North Sea oil and gas facilities, the ONS said, while both production and services activity fell.

July GDP growth was revised down to 0.1% from a previous estimate of 0.2%.

"While this figure is not what the country wants to see, it won't make much of a difference to the path we are already on. The Bank of England (BoE) will continue to increase its base rate at it battles to tame runaway inflation," said Marcus Brookes, chief investment officer at Quilter Investors.

"The BoE continues to face the incredibly difficult task of guiding the country through this uncertain period where it finds itself in a rock and a hard place by raising rates to meet inflation but embarking on a gilt buying operation to help steady the markets following the turmoil precipitated by the mini budget."

- Elliot Smith

One fund manager is cautioning against buying the dip, despite a 25% decline in the S&P 500 this year.

Instead, investors should be repositioning toward stocks sensitive to interest rates, John Ricciardi, head of asset allocation and a fund manager at Deuterium Capital, said.

He names three stocks in the consumer staples sectors, three in utilities, and two in materials for investors to scoop up when the time is right.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Treasury Secretary Janet Yellen said the U.S. is "doing very well" amid global economic uncertainty.

Although the U.S. economy has slowed after a strong recovery, jobs reports indicate a resilient economy, she said in an interview Tuesday with CNBC's Sara Eisen.

She also acknowledged that inflation is too high and that lowering it is a priority for the Biden administration, and emphasized the importance of maintaining a healthy labor market while doing so.

— Chelsey Cox, Tanaya Macheel

The International Monetary Fund on Tuesday cut its global growth forecast for next year to 2.7%.

The prediction is 0.2 percentage points lower than its July forecast, and suggests that 2023 will feel like a recession for millions around the world.

– Karen Gilchrist

Nick Griffin, chief investment officer at Munro Partners, is so bullish on one stock, he says it's a better bet than U.S. Treasurys.      

"It's cheaper than a U.S. Treasury. It grows faster than the U.S. Treasury, and it's probably got a better balance sheet than the U.S. Treasury. So from our point of view, it's a fairly safe place to [put your] cash," he said. Short-term U.S. Treasurys have surged in popularity among investors of late as yields pop.

CNBC Pro subscribers can read more here.

— Weizhen Tan

European markets are expected to open higher Thursday.

The U.K.'s FTSE 100 index is expected to open 32 points higher at 8,365, Germany's DAX up 25 points at 18,510, France's CAC 7 points higher at 8,143 and Italy's FTSE MIB up 59 points at 33,908, according to data from IG.

Earnings are due from Ferrovial, Telefonica, EDP, Enel, Pirelli and Salvatore Ferragamo.

— Holly Ellyatt