European markets closed lower Wednesday, with market sentiment rattled by stumbling U.S. debt ceiling talks.
The Stoxx 600 index closed 1.8% lower, with nearly all sectors down more than 1% and autos, banks, insurance and travel stocks all shedding more than 2%.
European markets
House Speaker Kevin McCarthy on Monday said he had a "productive" discussion with President Joe Biden but there were few indicators of progress made in negotiations on Tuesday.Â
U.S. Treasury Secretary Janet Yellen previously warned lawmakers that a default in early June is "highly likely."
Markets were downbeat globally, with Asia-Pacific shares falling and U.S. stocks trading lower.
U.K. inflation figures out Wednesday morning showed a fall in the headline rate from 10.1% to 8.7%, though this was above a Reuters consensus estimate of 8.2%. Prices rose 1.2% month on month, above a forecast of 0.8%.
Inflation in food and non-alcoholic beverages eased very slightly, but remained sky-high at 19.1%.
"A large part of April's drop is simply down to accounting measures," said Jeremy Batstone-Carr, European strategist at Raymond James Investment Services. "April 2022 saw energy prices increase by 47.5%. Thanks to the government's energy price guarantee, this energy surge has now dropped out of the year-on-year equation, leading the comparative inflation rate to naturally fall."
The rise in core CPI to 6.8% from 6.2% has dealt a "crushing blow to a beleaguered Bank of England," he added, and indicates interest rates may not have peaked, with another 25 basis point hike to 4.75% in June firmly on the table. Economists at Capital Economics said they now expect a peak rate of 5.25%, while money markets priced in bets the central bank will need to go as high as 5.5%.
The International Monetary Fund on Tuesday joined the Bank of England in saying that it no longer expects a U.K. recession this year.