Fighting in the Middle East and a mixed batch of corporate earnings also weighed on global equities.
The pan-European FTS”first 300 index was 0.9 per cent down at 1,326.9 with the Dow Jones industrial average falling 0.7 per cent to 11,111.88 and the Nasdaq Composite dropping 1.4 per cent.
The Institute for Supply Management said its index of US national factory activity rose to 54.7 in July from 53.8 in June, beating economists’ forecasts for a slight fall to 53.7.
“The ISM figures seem to be suggesting that the US inflation situation is now outside the Fed’s comfort zone so we’re looking at more chances of a rate increase again,” a London trader said.
European shares and US stock index futures had earlier ticked up after data showed core US consumer prices rose 0.2 per cent in June, as expected, but they soon fell back as investors digested the full report.
Dutch telecoms operator KPN jumped 5 per cent on forecast-beating results but Deutsche Bank slipped almost 4 per cent after reporting poor trading income in the second quarter.
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