Europe close: Stronger than expected US inflation data drags stocks lower

European shares finished in the red following a higher than expected reading on US wholesale prices the day before a Federal Reserve meeting where rate-setters were expected to lay out plans for a faster pace of tightening policy.

"Buyers are still in short supply across markets as we await the Fed tomorrow. US producer prices have risen sharply, at their fastest pace since 2010, something likely to put the discussion tomorrow into a more hawkish frame," said IG chief market analyst Chris Beauchamp.

"Tech stocks continue to be the big losers, while by comparison the Dow, with its relatively smaller tech weighting than its broader rival the S&P 500, is holding up well, losing only around 0.3%."

Against that backdrop, the Stoxx 600 ended down by 0.84% to 469.56, alongside a 1.08% fall for Germany's Dax to 15,453.56, although Italy's FTSE Mibtel and Spain's Ibex 35 managed to carve out small gains.

Technology was the biggest loser, with the corresponding Stoxx 600 sector gauge off by 2.37% amid concerns about a looming tightening of monetary policy across the Pond and 'market chatter' regarding equity valuations being just off their technology bubble peaks.

The euro gave up earlier gains against the US dollar, as did Brent crude oil futures while the German bund was down a bit.

Helping to steady markets earlier ahead of the Fed, a study by Africa's largest health insurer, Discover, showed much reduced deaths and hospitalisations thus far in the country from Omicron versus previous strains.

On the economic side of things, the unemployment rate in the UK fell from 4.3% to 4.2% as businesses continued to hire staff despite the end of the furlough programme.

And according to Eurostat, euro area industrial production increased at a year-on-year pace of 3.3% in October (consensus: 3.2%).

In equity news, Vifor Pharma was once again in favour after Australian biopharma giant CSL confirmed on Monday it was in talks to buy the Swiss drugmaker in a deal reportedly worth about $7.2bn.

Ocado shares jumped 6% as the online grocery delivery company won a patent case against Norwegian robotic company AutoStore and also said it expected to return to strong, mid-teens revenue growth in 2022, at the top of the historic pre-Covid range of 10% - 15%.

Shares in BT Group fell 4% as the Patrick Drahi-owned Altice increased its stake in the British telecoms firm to 18% but said it would not be making a takeover offer.