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European Markets Close Lower as Focus Turns to U.S. Inflation, Fed Outlook

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  • Investors are trying to assess the potential pace of the U.S. Federal Reserve's monetary policy tightening efforts.
  • Earnings also remain a key driver of individual share price movement in Europe, with Abrdn, IHG, L&G, Continental and Munich Re among those reporting before the bell on Tuesday.

LONDON — European markets closed lower on Tuesday as focus in global markets turns to a key U.S. inflation print due Wednesday.

The pan-European Stoxx 600 provisionally ended down by 0.6%, with technology stocks shedding 3.2% to lead losses while oil and gas stocks bucked the downward trend to add 1.2%.

Investors are trying to assess the potential pace of the U.S. Federal Reserve's monetary policy tightening efforts. A surprisingly strong U.S. jobs report last week seemed to reduce the likelihood of a recession, allowing the central bank the capacity for more aggressive rate hikes as it looks to rein in inflation.

Wednesday's July consumer price index is expected to offer some clarity on the path of interest rate hikes.

Shares in Asia-Pacific were mixed on Tuesday as markets continued to digest last week's stellar payrolls report and assess the trajectory of monetary policy, with Japan's Nikkei 225 the weakest performer in the region.

U.S. stocks reversed course to trade slightly lower on Tuesday as Wall Street reacted to some significant earnings reports, in particular weaker-than-expected revenue from Nvidia and a fourth-quarter revenue warning from memory chipmaker Micron.

"Inflation, geopolitical tensions, monetary policies; a lot of this year's uncertainty may have already been priced in, but bullish market drivers are still hard to find and there is a high chance there are not enough of them to justify an extended short- to mid-term extended rally or a trend reversal," said Pierre Veyret, technical analyst ActivTrades.

"Even if the reassuring earnings season managed to support market sentiment in July, some investors think this optimism will be short-lived. Equity markets may not have fully priced in monetary uncertainty from central banks, due to the lack of visibility of its long-term impact on growth."

Earnings also remain a key driver of individual share price movement in Europe, with Abrdn, IHG, L&G, Continental and Munich Re among those reporting before the bell on Tuesday.

Workspace company IWG plunged more than 11% to the bottom of the index, after their respective first-half earnings reports.

Toward the top of the benchmark, Ferrovial climbed almost 4% on a report that the Spanish transport infrastructure firm is considering options for its 25% stake in Britain's Heathrow Airport.

Heathrow has been at the center of chaos in international travel as airlines scramble to find enough staff to meet the surge of demand this summer.

On the data front, U.K. retail sales rose 1.6% in July, buoyed by a heatwave and sales of hot-weather clothing, picnic items and electric fans, according to a report from the British Retail Consortium.

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— CNBC's Ryan Browne contributed to this report

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