Europe close: Stocks swing into red after US inflation data

(Sharecast News) - After trading in positive territory for most of Tuesday's session, European stocks dropped into the red by the close of play as ongoing trade uncertainty offset better-than-expected economic data from the continent. The pan-European Stoxx 600 index finished 0.4% lower at 544.95 - having gained as much as 0.4% earlier on - with all major bourses across the region registering losses in afternoon trade.

The Stoxx 600 was down for the third straight after settling at a one-month high of 552.93 on Thursday, with stocks hit by this weekend's announcement of a 30% trade tariff on EU imports into the US.

The duty is due to take effect on August 1, and EU officials are rushing to try to secure a trade deal with the US ahead of the deadline.

Wall Street markets kicked off in mixed fashion after data showed that US inflation accelerated sharply in June as the impact of Donald Trump's trade tariffs began to seep into consumer prices. US CPI rose at a year-on-year rate of 2.7% last month, up from 2.4% in May, with rising price pressures now expected to delay future interest-rate cuts by the Federal Reserve.

"European and US stock indices, which began the day on a strong footing, lost some of their lustre amid rising US inflation, despite core inflation increasing slightly less than expected," said Axel Rudolph, senior technical analyst at IG.

Rudolph said that a 17% reported decline in second-quarter profits at JPMorgan Chase and a underwhelming earnings report from Wells Fargo were also weighing on sentiment in afternoon trade.

Eurozone data improves

In economic news, eurozone production rose by 1.7%, a notable improvement on April's 2.2% slide and ahead of forecasts for a more modest 0.9% rise as US buyers stocked up ahead of tariffs coming into force.

The ZEW eurozone economic expectations index, which surveys institutional investors and analysts, inched 0.8 percentage points higher to 36.1% for July. This was a four-month high for the index but below the consensus forecast of 37.8%.

However, the ZEW's German economic sentiment index improved more than expected, rising to 52.7 from 47.5 in June, with two-thirds of the experts surveyed expecting the German economy to improve.

Market movers

Second-quarter results from Ericsson came in mixed on Tuesday, with shares in the Swedish telecom giant falling on the back of a cautious outlook, owing partly to US tariffs. Net sales fell 6%, missing estimates, while earnings per share comfortably beat forecasts.

However, looking ahead, the company noted "increased uncertainty" in its the outlook, "both in terms of potential for further tariff changes as well as in the broader macroeconomic environment".

Accelleron Industries surged after lifting earnings guidance for the full year following impressive growth in its first half. The Swiss exhaust turbochargers manufacturer said it expected to grow revenues by 16-19% at constant currencies this year.

In London, shares in blue chip housebuilder Barratt Redrow fell sharply after it warned both profits and completions would be lower this year, while discount retail chain B&M plunged to record lows after like-for-like sales missed expectations.