European Stocks Dip Amid Auto Sector Selloff and UK Inflation Concerns

European stocks fell on Wednesday, driven by declines in automakers due to potential Chinese tariffs and higher-than-expected UK inflation data. Investors are closely watching the EU's investigation into Chinese EV subsidies and upcoming U.S. Federal Reserve minutes, which could influence market trends.

European stocks slipped on Wednesday, hurt by a selloff in automakers following a report about possible Chinese tariffs on imported cars and a stronger-than-expected British inflation data further dampening the mood.

European automakers fell 1.9% to a more-than-three-month low, with shares of Mercedes-Benz , BMW and Volkswagen falling in the range of 1.1% and 2.3%. China should raise its import tariffs on large gasoline-powered cars to 25%, a government-affiliated auto research body expert told China's Global Times newspaper as the country faces sharply higher U.S. auto import duties and possibly additional duties to enter the EU.

"The deadline is approaching for the EU to announce the conclusions of its investigation into Chinese EV subsidies, and this move by China is clearly a warning shot that if the EU takes action then it can expect a similar response from China on EU car exports," said Stuart Cole, chief macro economist at Equiti Capital. The European Commission launched an investigation in October into whether fully-electric cars manufactured in China were receiving distortive subsidies and warranted extra tariffs. The EU could impose provisional duties in July.

The continent-wide STOXX 600 index dipped 0.3%, with Britain's FTSE 100 leading losses in the region after data showed UK inflation fell by a less-than-expected 2.3% in April, prompting traders to cut their bets on a Bank of England interest rate cut next month. Investors are awaiting minutes from the U.S. Federal Reserve's last policy meeting as well as AI darling Nvidia's quarterly earnings later in the day to gauge if the recent rally in markets could continue.

The European Central Bank should not necessarily follow up a rate cut in June with another move the following month, even if inflation is on its way to target, Bundesbank President Joachim Nagel said in a newspaper interview published on Tuesday. Among other movers, Swiss Life dipped 1.9% after Switzerland's largest life insurer narrowed its 2024 outlook for fee income.

Marks & Spencer jumped nearly 9% after the British retailer reported a 58% rise in annual profit as its strategy to re-shape the business delivered strong sales growth in both its food and clothing divisions.

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