EUROPE MARKETS: European Stocks Slip As Inflation Falls, U.K. Election Nerves Set In

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Pound slumps after voting model points to slide in Tory support

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European stock markets mostly headed lower on Wednesday, as investors digested the latest bout of uncertainty surrounding the U.K. election and assessed a sharper-than-expected fall in eurozone inflation.

The Stoxx Europe 600 index edged down 0.1% to 390.24, setting it on track for a fifth straight session of losses. The benchmark on Tuesday fell 0.2% ( as bank stocks declined on concerns over a potential early election in Italy.

For the month, the Stoxx 600 was still set to log a 0.8% gain.

"Markets are wilting slightly at the moment. There's nothing sinister around, but it does feel like there is a slight loss of confidence as data momentum is stalling a touch and politics continues to be unpredictable," said Jim Reid, strategist at Deutsche Bank, in a note.

Investors were watching the latest developments in the U.K. ahead of the country's general election next week. A projection from YouGov, reported by the Times newspaper, indicated that the Conservatives might lose 20 seats ( in the June 8 vote. That means Prime Minister Theresa May's party would lose its current majority in parliament, which it has had since the election in 2015.

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The pound tanked to an intraday low of $1.2771 after the report, on concerns a hung parliament would make Brexit negotiations with Brussels more difficult. The weaker pound helped boost the globally-exposed FTSE 100 index , setting it on track for a new all-time closing high.

Other European indexes were more mixed. France's CAC 40 fell 0.2% to 5,296.26, while Germany's DAX 30 was flat at 12,599.01.

Economic updates: Fresh factory data out of China did little to inspire investors, with the official purchasing managers index for May coming in unchanged at 51.2 (

In Europe, Germany's unemployment rate fell to a new low ( of 5.7% in May, from 5.8% in April.

Eurozone inflation for May slid ( to 1.4% from 1.9% in April, missing forecasts of a 1.5% reading. Meanwhile, unemployment in the currency area dropped to 9.3% in April from 9.4% in March. Analysts had expected the joblessness rate to stay at 9.4%, according to FactSet.

The euro was largely unmoved after the reports, fetching $1.1179, compared with $1.1178 ahead of the data. The shared currency bought $1.1187 late Tuesday in New York.

Movers: Shares of Ericsson AB (ERIC) (ERIC) jumped 4.7% after reports activist investor Cevian Capital has bought a $1 billion stake in the Swedish telecom-equipment maker.

Shares of Metro AG (MEO.XE) lost 2.5% after the German retailer said it swung to an operating loss in second quarter (

Shares of Tesco PLC (TSCO.LN) (TSCO.LN) gave up 1.3% after the latest Kantar data on U.K. supermarkets showed the grocer's market share fell to 27.8% ( in the 12 weeks to May 21, from 28.3%.

(END) Dow Jones Newswires

May 31, 2017 05:28 ET (09:28 GMT)