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European Markets Close Lower Despite Renewed U.S. Rate Cut Hopes

European stock markets closed mostly weak on Wednesday, after Federal Reserve Chairman Jerome Powell's prepared remarks before the House Financial Services Committee reignited optimism about a potential rate cut by the Fed later this month.

White House economic adviser Larry Kudlow's comments that officials from the U.S. and China held a "constructive" phone conversation on Tuesday raised expectations about some progress on the trade front.

Investor sentiment was down due to concerns over tensions between the U.S. and the U.K. after Britain's ambassador to Washington Kim Darroch resigned today. U.S. President Donald Trump made a scathing attack on British Prime Minister Theresa May on Tuesday and said he will no longer work with Britain's ambassador to the US.

The pan European Stoxx 600 ended down 0.2%. Among the major markets in Europe, Germany ended notably lower with its benchmark DAX declining 0.51%. The U.K.'s FTSE 100 and France's CAC 40 both edged lower by 0.08%, while Switzerland's SMI ended lower by 0.24%.

Among other markets in Europe, Greece and Turkey ended sharply higher. Austria, Denmark and Italy recorded modest gains.

Belgium, Finland, Netherlands, Norway, Poland, Portugal and Russia closed flat, while Czech Republic, Iceland, Ireland, Spain, Sweden and Ukraine ended weak.

In the UK market, Micro Focus tumbled 11.7% after the company warned that its revenues would fall by nearly 6% this year.

Shares of recruitment firm PageGroup slumped 15% after a warning that it expects profits this year to come in at the lower end of expectations due to slower hiring caused by Brexit uncertainties. Rival Hays plunged by about 6%.

In Germany, auto stocks Daimler, Volkswagen and BMW shed 0.7 to 1.6%.

Continental, E.ON, Covestro and Adidas also closed weak, while Fresenius and Infineon moved higher.

French stocks Pernod Ricard, Unibail Rodamco, Sanofi, Kering, Renault, Orange and Peugeot ended with sharp to moderate losses.

Technip, Carrefour, Airbus Group, STMicroElectronics and Societe Generale moved up 1 to 2%.

In economic news from Europe, UK's GDP rose 0.3% month-on-month in May following a 0.4% decline in April, data from the Office for National Statistics showed. The expansion was in line with economists' expectations. In March, GDP edged up 0.1%.

However, the rolling three-month growth slowed to 0.3% in the quarter to May from 0.4% in the three months to April. Economists had forecast 0.1% expansion. In the January to March period, the growth was 0.5%.

France's industrial production grew at the fastest pace in one-and-a-half years in May, rising 4% year-on-year in May, following a 1.1% increase in April, data from the statistical office INSEE showed on Wednesday. Economists had expected 1.6% rise.

Italy's industrial production declined further in May, but at a slower pace, data from the statistical office ISTAT showed on Wednesday. The data said industrial production fell 0.7% year-on-year in May, following a 1.5% decline in April. Economists had expected production to remain unchanged.

In the U.S. the Fed Chairman Jerome Powell today told lawmakers that crosscurrents, such as trade tensions and concerns about global growth, have continued to weigh on the U.S. economic outlook since the central bank's June meeting.

The Fed chief pointed out that increased uncertainties about the economic outlook and muted inflation pressures led the central bank to pledge after the June meeting to "act as appropriate to sustain the expansion."

Powell noted that many meeting participants saw that the case for a somewhat more accommodative monetary policy had already strengthened.

"Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook," Powell said in his prepared remarks.

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