Europe midday: Stocks slip amid Italian political uncertainty

Stocks on the Continent were slipping lower in early trading on the back of signs of political troubles brewing in Italy and following modest losses overnight in US stock markets.

Against that backdrop, the pan-European Stoxx 600 was trading 0.69% lower to 409.96 as of 1134 BST, alongside a 0.58% decline on the German Dax to 12,682.35.

Milan's FTSE Mib was off by 2.04% to 20,852.54 as the yield on the benchmark 10-year Italian government note rose by 23 basis points to 3.37%.

Worth noting there was a fair bit of market chatter regarding the risk of an imminent political crisis in Italy should the ruling coalition break apart.

Yields on similarly-dated Spanish government debt meanwhile were better behaved but up by 12bp to 2.37%.

Wall Street had closed with small losses overnight after the release of consumer price data showing that inflation rose at its fastest clip since late 1981 in June.

Michael Hewson, chief market analyst at CMC Markets UK further pointed out how the US Treasury curve between 2 and 10-year debt inverted to its greatest extent since 2000 on the back of those numbers.

"With bond markets increasingly pricing economic slowdown equity markets are struggling to make sense of what comes next when it comes to valuations, with the first test coming later today with JPMorgan Chase Q2 earnings numbers [which are due out later on Friday]," Hewson added.

"The second puzzle to navigate is how many more rate hikes are coming down the pipe before we see central banks cutting rates again."

Back in Europe, on Thursday the European Commission lowered its forecasts for euro area growth to 2.6% and 1.4% for 2022 and 2023, respectively, down from prior forecasts of 2.7% and 2.3%.

Inflation on the other hand was now seen coming in at 7.6% and 4.0% over the current year and next, up from the 6.1% and 2.7% gains previously penciled-in.

In the background, front-dated Brent crude oil futures were drifting lower by 0.45% to $99.45 a barrel on the ICE.

Euro/dollar was 0.28% lower to 1.0031.