European markets close lower despite improved German sentiment

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European markets closed lower on Wednesday, following a loss in the previous session, despite data showing improved business sentiment in Germany and an uptick in eurozone services and manufacturing activity.

The pan-European Stoxx 600 index closed 0.3% lower, with most sectors ending the trading day in negative territory. Oil and gas and media stocks led losses, down 0.9%, while utilities gained 0.5% to lead marginal gains.

Europe appeared to be taking cues from the US as it enters corporate earnings season, where markets were mixed on Tuesday and futures were lower Wednesday.

A widely watched gauge of German business sentiment from the Munich-based Ifo Institute showed “considerably less pessimistic expectations” in January.

President of the Ifo, Clemens Fuest, told CNBC that while Germany’s economy may slow in the first quarter, it was unlikely to enter a technical recession, given brighter sentiment.

Meanwhile, S&P Global eurozone composite purchasing managers’ index came in at 50.2 in January, up from 49.3 in December and ahead of a consensus forecast of 49.8. The 50 mark separates expansion from contraction.

US stocks fell on Wednesday after the latest batch of corporate earnings intensified concerns over how some of the largest US companies are faring as rates rise and recession fears grow.

Asia Pacific shares were mixed, with Japan and South Korean markets rising as Australia dipped. Markets in Hong Kong and mainland China closed for the Lunar New Year.

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