Europe close: Stocks end mixed as investors keep an eye on US debt ceiling talks

European shares were mostly higher on Monday, shrugging off a European Commission forecast for slightly more persistent inflation.

Investors were also keeping a close eye on continuing talks on the US debt ceiling and developments in the Turkish election.

The pan-European Stoxx 600 index was up 0.25% at 466.67, albeit with the major regional bourses mixed alongside.

Germany's Dax edged up 0.02% to 15,917.24, but the Spanish Ibex 35 dipped 0.35% to 9,201.50.

US President Joe Biden on Sunday said he expected to meet with congressional leaders on Tuesday for talks on a plan to raise the nation's debt limit and avoid a default.

Nonetheless, on Monday the Republican speaker of the House of Representatives sounded a downbeat note on the progress made to date.

In Turkey, the tightly-contested election headed for a runoff vote at the end of the month, after neither incumbent President Tayyip Erdogan nor his rival Kemal Kilicdaroglu won an outright majority.

Hargreaves Lansdown analyst Susannah Streeter said the uncertainty was hitting the Turkish lira.

Erdogan has led highly controversial monetary policies aimed at increasing exports, rather than tackling painful inflation, and the prospect of Turkey’s ‘strongman’ winning another term has weakened the currency further,” she said.

“There are expectations of a rollercoaster ride in the days ahead, as sentiment waxes and wanes about the prospects for the opposition coalition, which has pledged to pull more conventional levers to restore financial stability.”

In economic news, the European Commission warned that inflation was falling more slowly than hoped, prompting worries that more interest rate increases could be on the way.

In its Spring Forecast, the commission said the resilience of the European Union economy had also delayed any slowdown in inflation. Consumer price inflation was expected to fall this year to 5.8% from 8.4%, but higher than a forecast of 5.6% made in February.

GDP growth on the other hand was now pegged to reach 1.0%, which was one tenth of a percentage point more than pereviously anticipated.

Germany's wholesale price index fell at an annual clip of 0.5% in April, the first year-on-year drop since December 2020.

On the equities front, Diploma shares gained as the company lifted guidance after strong first half results.

Shares in German drug developer Evotec were up 5% as the company reaffirmed annual earnings targets.

Wood Group plunged more than a third after private equity outfit Apollo pulled out of bid talks.