Europe markets close higher with Fed in focus; UK net borrowing higher than expected

LONDON — European stock markets closed higher Wednesday, rebounding after snapping a long winning streak on Tuesday.

The pan-European Stoxx 600 index provisionally closed 0.32% higher on Wednesday as nearly all sectors traded positive. Autos climbed 1.45% and mining stocks added 1.02%, while telecoms dipped 0.24%.

The regional benchmark closed in the red on Tuesday, snapping a strong run that has lasted since the global sell-off across Aug. 1-5.

U.K. public sector net borrowing rose to £3.1 billion ($4.037 billion) in July, up by £1.8 billion the previous year, the Office for National Statistics announced Wednesday. The figure was higher than a consensus forecast of £2.5 billion, while borrowing across the first four months of the year came in £4.7 billion above the independent Office for Budget Responsibility's March forecast.

Alex Kerr, U.K. economist at Capital Economics, said it "continued the recent run of bad news on the fiscal position." Even if spending does not continue to outpace forecasts, tax rises should be expected in the new Labour government's first budget on Oct. 30, Kerr added.

It is a quiet remainder of the week on the European data front, save for flash purchasing managers' index figures for the euro area on Thursday.

Attention is instead turning stateside, with the release of minutes from the Federal Reserve out Wednesday, ahead of Fed Chair Jerome Powell's speech at the closely watched central bank symposium at Jackson Hole on Friday.

An interest rate cut by the Fed in September has long been fully priced in by markets, but sentiment is shakier over whether that will be by 25 or 50 basis points. According to CME's FedWatch tool, probability stands at 67.5% for the former and 32.5% for the latter.

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