Europe close: Stocks trim losses across the continent

European markets were in the red on Tuesday after core inflation proved stickier than expected, but stocks rallied into the close with indices finishing well above their intraday lows.

The Stoxx 600 index finished down 0.4% at 510.91, bouncing off an earlier low of 508.08 (-1.0%).

The DAX in Frankfurt, the FTSE MIB in Milan and the CAC in Paris, having all dropped more than 1.1% in morning trade, finished the session down 0.7%, 0.7% and 0.3% respectively.

Political uncertainty continues to dominant market sentiment this week in France as investors assess the economic outlook following the weekend's first round of legislative elections, which showed the far-right anti-immigrant National Rally (RN) party in front.

Eyes now turn to this coming Sunday's second-round vote, with other parties having only until Tuesday evening to withdraw names from the election to leave those with the best chance of winning. According to the latest AFP tally, at least 200 candidates – most of whom are left-wing or centrist – have pulled out of the running in an attempt to block RN winning an absolute majority in the National Assembly..

"Political jitters continu[ed] to keep mainland markets under pressure," said Joshua Mahony, chief market analyst at Scope Markets. "Initial gains seen in the immediate aftermath of Sunday’s vote saw a short-term rebound for the CAC, but we are once again seeing those concerns resurface as we move steadily towards this weekend’s final rundown in France."

In other news, headline inflation across the eurozone slowed in line with expectations in June, according to preliminary estimates published by Eurostat. The harmonised index of consumer prices was 2.5% higher than last year, with annual inflation easing from the 2.6% rate seen in May. However, the annual rate of core inflation – which excludes volatile items such as food, energy, alcohol, and tobacco – held steady at 2.9%, despite expectations for a drop to 2.8%.

"June's small decline in eurozone inflation was not very encouraging, with the core component stuck above target reminding us that the disinflationary process will be gradual. Although disinflation will continue, stubbornly high services inflation rules out a July rate cut," said Riccardo Marcelli Fabiani, senior economist at Capital Economics.

Market movers

Insurance companies were largely out of favour, including Munich Re, Swiss Re, Beazley, Hiscox and Lancashire, on the back of concerns about Hurricane Beryl, a category-five storm which is tearing through the Caribbean.

Fresh catering group Sodexo was a heavy faller, dropping 4% after missing sales forecasts in the third quarter. Organic sales grew 6.8% to €6.07bn, coming up short of the €6.11bn estimate.

Sainsbury's fell 3% in London despite boasting a "market-beating" grocery performance in its first quarter, as like-for-like sales growth slowed from 4.8% in the fourth quarter to just 2.7% on the back of declines in general merchandise sales and at its Argos division.

The oil and gas sector was mostly higher, tracking crude prices, though Brent had come off its daily highs by the close. Brent crude rose 0.3% to $86.86 a barrel, having touched an earlier high of $87.46 – its highest since April. BP, Shell and Repsol were notable risers.

FTSE 250-listed Tritax Eurobox rallied 4% extending the deadline for Brookfield Asset Management to make an offer for the company, and revealing that it had received other expressions of interest from a number of parties.