Europe close: Stocks slip heading into Fed rate decision
European shares slumped on Tuesday despite the release of in-line wholesale inflation data in the States, as traders stayed on the sidelines ahead of a potentially key US central bank meeting.
The pan-regional Stoxx 600 index fell 1.26% to 407.32. Stocks slumped more than 2.4% on Monday. Germany's Dax lost 0.91% to 13,304.39, although Italy's FTSE Mibtel dipped 0.32% to 21,846.89.
Euro/dollar and longer-term government bond yields in the Eurozone rose although after the close of London markets Brent futures also gave back earlier gains and dipped.
Commenting on the outlook for the US Federal Reserve's eagerly awaited policy decision the next day, Chris Beauchamp, chief market analyst at IG, said: "Not just 75bps but even 100bps are being viewed as a possibility on Wednesday evening, as the committee looks to try and steal a march on inflation.
"At the moment it is quite tough to gauge the kind of decision that will keep markets from selling off yet further, and whether hints at more dramatic tightening will counter any optimism if the Fed sticks to 50 bps. But hopes of a summer pause are certainly entirely dashed now."
Investors were also digesting the latest figures from the UK's Office for National Statistics, which showed the unemployment rate unexpectedly rose in the three months to April for the first time in a year, while vacancies remained at record levels and wages fell at the fastest rate in a decade.
The unemployment rate ticked up to 3.8% from 3.7% in the three months to March and versus expectations for a decline to 3.6%. Still, it remained close to 50-year lows.
In Germany on the other hand, investor sentiment improved in June but remained in negative territory, according to a survey released by the ZEW Center for European Economic Research in Mannheim.
The headline ZEW investor expectations index rose to -28.0 from -34.4 in May, coming in just a touch below consensus expectations for a reading of -27.5.
Meanwhile, the current situation index rose to -27.6 in June from -36.5 the month before.
In equity news, shares French IT company in Atos slumped more than 22% after it said chief executive Rodolphe Belmer was quitting after six months in the job following weeks of reports of deep divisions with the board over strategy.