The pan-European Stoxx 600 index was down 0.66% in midday trade with all major bourses lower. US futures indicated a weaker start.

‘’Investors are treading carefully ahead of the key US inflation report out tomorrow as economic data becomes king while markets assess what is next for interest rates,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:HRGV).

“The Bank of England’s decision on Thursday is looming large, with another 0.25% hike expected, to squeeze more exuberance out of the economy and bring down still painful inflation. The latest British Retail Consortium numbers show the insidious effect price hikes are having. Consumers are spending more, but gaining less for their money, with overall retail sales up 5.1% but volumes down.”

In economic news, UK house prices fell in April after three consecutive months of growth, according to data released by Halifax on Tuesday.

China reported better-than-expected exports in April, although growth slowed, while imports fell again, according to data released on Tuesday.

Exports rose by 8.5% year on year $295.42b, compared with an increase of 14.8% in March and above expectations for a rise of 6.4%.

On the equities front, shares in SBB fell as it pulled a 2.63bn Swedish crowns rights issue after S&P Global cut its credit rating to junk.

Banco BPM (LON:0RLA) climbed after Italy’s third-largest bank raised its profit target for this year and the next, following stronger-than-expected first-quarter earnings.

Direct Line (LON:DLGD) fell sharply as the insurer said on Tuesday warned that rising claims in its motor segment will put pressure on earnings.

Victrex (LON:VCTX) tanked after reporting weaker first half profits.