European stock markets fell as investors weighed mixed economic data, while British bank shares and the pound declined following reports that the sector could be hit with a windfall tax, AFP reported.

On Wall Street, the Dow Jones and S&P 500 reached fresh records after an upward revision to U.S. second-quarter growth and impressive results from AI chip giant Nvidia. Key U.S. inflation data are due today, which could signal forthcoming Federal Reserve action, after Chair Jerome Powell hinted that interest rates are likely to be cut in September.

“Markets are already pricing in a high probability of a Fed rate cut next month, and today’s inflation data will be pivotal for monetary policy,” commented Derren Nathan, head of research at Hargreaves Lansdown. He added that the impact of tariffs on the prices of goods and services is being closely watched. “If inflation turns out higher than expected, the path toward lower borrowing costs in the U.S. in December will become less predictable.”

In Germany, unemployment exceeded three million in August for the first time in more than ten years. Pressured by high energy costs and fierce Chinese competition, German manufacturers were in difficulty even before U.S. President Donald Trump imposed new tariffs. Meanwhile, data showed that inflation slowed in France and Italy, while in Spain it remained unchanged. The euro fell against the dollar, which also strengthened against the pound.

In the United Kingdom, the influential think tank Institute for Public Policy Research calculated that the new Labour government could raise billions of pounds by imposing a windfall tax on banks. This immediately hit the market, with NatWest and Lloyds suffering the most—both lost about 5% in midday trading. “Such rumors have a strong effect due to the obvious need for the government to increase revenues to address its fiscal difficulties,” said Richard Hunter, head of markets at Interactive Investor.

By 11:00 GMT the main indices moved as follows: London’s FTSE 100 fell 0.3% to 9,193.21 points, Paris’s CAC 40 declined 0.5% to 7,726.88, and Frankfurt’s DAX lost 0.4% to 23,935.36. In Asia, Tokyo’s Nikkei 225 closed down 0.3% at 42,718.47, while Hong Kong’s Hang Seng rose 0.8% to 25,189.34 and the Shanghai Composite added 0.4% to 3,857.93. In New York, the Dow Jones closed up 0.2% at 45,636.90, and the S&P 500 up 0.3% at 6,501.86.

On the currency markets, the euro fell to $1.1667, while the pound declined to $1.3458. The dollar strengthened against the yen to 147.18, and the euro rose against the pound to 86.69 pence.

Oil prices also fell: West Texas Intermediate slipped 0.4% to $64.33 a barrel, and Brent down 0.4% to $67.69. | BGNES