Europe's STOXX 600 drops to one-month low after hot U.S. inflation data

European shares fell to a one-month low on Wednesday, led by declines in real estate and financials after a hotter-than-expected U.S. consumer inflation print dashed investor hopes for imminent interest rate cuts. Latest data showed U.S. consumer prices increased more than expected in March amid rising cost of gasoline and housing, pushing back expectations for the U.S. Federal Reserve's first interest rate cut to September from June.

European shares fell to a one-month low on Wednesday, led by declines in real estate and financials after a hotter-than-expected U.S. consumer inflation print dashed investor hopes for imminent interest rate cuts.

Latest data showed U.S. consumer prices increased more than expected in March amid rising cost of gasoline and housing, pushing back expectations for the U.S. Federal Reserve's first interest rate cut to September from June. The pan-continent STOXX 600 lost 0.6% by 1315 GMT, with rate-sensitive real estate and financial services sectors dropping 0.8% and 1.9%, respectively.

Main indexes in Germany, France, Italy and Spain lost between 0.5% and 1.1%. "With rate cut expectations getting pushed further out over the last few weeks, today's CPI data will give little hope for those looking for better news on that front," said Neil Birrell, chief investment officer and lead fund manager at Premier Miton Diversified Funds.

"The Fed has got some head scratching to do and if other central banks were waiting for the Fed to move, they have got a conundrum on their hands now." The technology sector also lost 0.8%, pressured by a jump in Euro zone bond yields.

The sector had led gains on the benchmark index earlier in the session following upbeat quarterly revenue from Taiwan chipmaker TSMC. Bucking the broader trend, Barry Callebaut jumped 9.6% and was on track for its best day in sixteen years after the chocolate maker reported upbeat half-yearly revenue helped by increasing cocoa prices.

Since the start of April, the benchmark index has traded in a tight range, not far away from record highs hit last month, as caution dominated the mood ahead of U.S. March consumer prices. Focus will now shift to the European Central Bank's monetary policy meeting on Thursday, where traders expect a near 80% probability that rates would be left unchanged.

Koninklijke Philips pared early gains and was last up 0.3% after the medical equipment maker reached an agreement with the U.S. government on a consent decree about the sales of its new sleep apnea machines. Italgas slipped 1.8% after the Italian gas distributor sent a preliminary offer worth 4-5 billion euros ($4.3-5.4 billion) for its main domestic rival 2i Rete Gas, as per a report.

Elsewhere, Norway's benchmark index gained 0.8% after data showed the core inflation rate fell below expectation in March, supporting the central bank's view that interest rates will decline later this year.