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European Markets Drop As Traders Turn Cautious

The European markets ended Wednesday's session firmly in negative territory. Worries about slowing Chinese growth weighed on investor sentiment. Traders are also keeping a close eye on developments around Brexit and Italy's budget.

The British pound added to gains against the dollar on hopes for a breakthrough in Brexit negotiations. Media reports suggest that a Brexit deal could come as early as Monday.

The pan-European Stoxx Europe 600 index weakened by 1.61 percent. The Euro Stoxx 50 index of eurozone blue chip stocks decreased 1.65 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.92 percent.

The DAX of Germany dropped 2.21 percent and the CAC of France fell 2.11 percent. The FTSE 100 of the U.K. declined 1.27 percent and the SMI of Switzerland finished lower by 0.79 percent.

In Paris, luxury goods conglomerate LVMH sank 7.14 percent on fears of a looming slowdown in Chinese demand as the U.S.-China trade war escalates.

In London, Scapa Group tumbled 7.98 percent. The supplier of bonding solutions reported a fall in first-half revenues due to adverse currency movements.

HSBC Holdings slid 0.34 percent after the bank entered into a $765 million settlement in the U.S over its sale of mortgage-based securities during the run-up to the financial crisis.

Brewery pub and hotel operator Marston's fell 2.17 percent. The company reported higher revenues in its fiscal 2018, and said it expects growth in underlying profit before tax, driven by strong trading during the World Cup and warm summer weather.

Recruitment firm PageGroup declined 2.20 percent. The company expects full-year profit to come above market expectations.

France's industrial production grew at the slowest pace in three months in August, the statistical office Insee showed Wednesday. Industrial production climbed 0.3 percent from July, the weakest since May when it remained flat. Production had increased 0.8 percent in July.

The UK economy stagnated in August as the increase in industrial production was offset by a contraction in construction and farm sectors, the Office for National Statistics reported Wednesday. Gross domestic product remained unchanged after expanding 0.4 percent in July. GDP was forecast to climb 0.2 percent.

The UK's merchandise trade deficit widened in August from the previous month and was bigger than economists expected, preliminary data from the Office for National Statistics showed on Wednesday. The visible trade deficit widened to GBP 11.19 billion from GBP 10.38 billion in July. Economists had expected a shortfall of GBP 10.8 billion.

With an increase in prices for services offsetting a modest drop in prices for goods, the Labor Department released a report on Wednesday showing producer prices in the U.S. rose in line with economist estimates in the month of September.

The Labor Department said its producer price index for final demand increased by 0.2 percent in September after edging down by 0.1 percent in August. Economists had expected prices to rise by 0.2 percent.

A report released by the Commerce Department on Wednesday showed a bigger than expected increase in wholesale inventories in the U.S. in the month of August. The Commerce Department said wholesale inventories jumped by 1.0 percent in August after rising by 0.6 percent in July. Economists had expected wholesale inventories to climb by 0.8 percent.

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