European Stocks Close Lower as UK Inflation Soars to Nine-Year High

  • U.K. inflation soared to a nine-year high in August, according to ONS data.
  • China's retail sales grew at a much lower pace than expected in August.
  • U.S. Labor Department figures showed a smaller-than-expected rise in inflation for August.

LONDON — European markets closed lower on Wednesday as traders reacted to economic data out of the U.K. and China.

The pan-European Stoxx 600 provisionally ended Wednesday's session down 0.7%, with utilities shares dropping 2.7% to lead the losses as most sectors and major bourses dipped into the red.

U.K. inflation soared to a nine-year high in August, with consumer prices rising 3.2% year-on-year after a 2% annual rise in July, according to the Office for National Statistics. The 1.2 percentage point incline was the sharpest since records began in 1997.

"Following sharp spikes in inflation across the Atlantic in recent months, the UK economy has now come to the inflation party," said Hugh Gimber, global market strategist at JPMorgan Asset Management.

"The doves among the members of the Bank of England's Monetary Policy Committee will take some comfort in the large contribution from restaurant and hotel prices, given that much of this was driven by the heavy discounts offered under the Eat Out to Help Out Scheme last summer. That said, there are also signs that inflationary pressures are increasingly broad based across many sectors of the economy."

In Asia, stocks closed mostly lower on Wednesday after data showed China's retail sales growing at a much lower pace than expected in August. The retail sales print for the month grew 2.5%, against a 7% growth forecast by analysts polled by Reuters.

Stateside, the Dow Jones Industrial Average attempted to rebound Wednesday after a string of negative trading sessions this month.

Labor Department figures published Tuesday showed a smaller-than-expected rise in U.S. inflation for the month of August, stoking uncertainty over the recovery and the timing of the Fed's tapering of asset purchases.

Elsewhere, the Institute of International Finance (IIF) revealed on Tuesday that global debt soared to a record $300 trillion in the second quarter. However, debt-to-GDP declined for the first time since the onset of the Covid-19 pandemic as growth recovered.

European investors also have on eye on the upcoming German federal election on September 26, with polls suggesting the race is still too close to call as voters try to decide a successor to Chancellor Angela Merkel.

In terms of data, euro zone industrial production was stronger than expected in July, Eurostat data revealed Wednesday, rising 1.5% month-on-month and 7.7% annually against expectations of 0.6% and 6.3% increases.

Earnings came before the bell from H&M Group and Zara owner Inditex.

In terms of individual share price movement, Just Eat Takeaway fell 4.6% on Wednesday after competitor Deliveroo announced a partnership with Amazon. Toward the top of the Stoxx 600, Swedish Match rose 4.3% after announcing plans to spin off its cigar business.

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