European stocks close lower as inflation fears return; Starmer faces leadership challenge

LONDON — European stocks closed sharply lower on Friday as inflation concerns returned to investors' minds following a week of hotter-than-expected U.S. price data and a jump in oil prices.

The pan-European Stoxx 600 index finished the session 1.6% lower. Major bourses in London, Paris, Frankfurt and Milan were all down, while most regional sectors also closed the day in negative territory.

The Magnum Ice Cream Company's Amsterdam-listed shares surged more than 8% amid reports that Blackstone and CD&R are among the firms mulling a private equity swoop for the group. The world's largest standalone ice cream maker spun out of Unilever late last year.

Meanwhile, mining stocks were among those hit hardest by Friday's sell-off.

Antofagasta and Fresnillo registered double-digit losses after gold sold off and oil prices ticked higher as hopes of a breakthrough in the Middle East peace negotiations appeared to fade. Antofagasta and Fresnillo both ended the session down about 10%.

In the U.K., Prime Minister Keir Starmer faces a fresh battle for his premiership after his Labour Party rival Andy Burnham was offered a route to parliament on Thursday, paving the way for a leadership challenge.

Burnham, the current Manchester mayor and the more left-leaning candidate, is not an MP but Labour MP for Makerfield Josh Simons announced he was resigning, paving the way for Burnham to run for the seat in a special election. Victory is by no means guaranteed, however, as Burnham will come up against a resurgent right-wing party Reform UK.

Burnham is seen by the bond market as leaning more to the left — a factor that has sent borrowing costs higher, with investors fearing a less conservative prime minister could herald more borrowing and public spending, and higher debt.

The pound clocked its fifth consecutive daily decline against the dollar after a week of political tumult, down 0.6% to 1.3317. The yield on 10-year Gilts, the benchmark for U.K. government debt, was more than 19 basis points higher in afternoon trade, at 5.185%.

Shares in Europe are tracking Asian markets' overnight declines after South Korea's benchmark Kospi index slid more than 6% on Friday, retreating from a fresh record high above 8,000, as broader Asia-Pacific markets fell.

Japan's Nikkei 225 declined about 2% and the Topix lost 0.4%. 

Hong Kong's Hang Seng index slid 1.6% while the CSI 300 dropped 1.1%. India's Nifty 50 was down 0.2%.

Investors continued to watch developments from the U.S.-China summit, as the meeting between U.S. President Donald Trump and China premier Xi Jinping concluded Friday without any apparent major policy breakthrough.

On Wall Street, the broad-based S&P 500 was down 1.1%, while the Dow Jones Industrial Average fell 1%, with the Nasdaq sliding 1.5% amid concerns over a resurgence in U.S. inflation.

On Wednesday, April's U.S. producer price index rose 1.4%, the biggest monthly increase since March 2022 and also exceeding economists' 0.5% consensus estimate and the upwardly revised 0.7% March increase. On an annual basis, the index was up 6% — the biggest increase since December 2022.

The report arrived a day after the Bureau of Labor Statistics reported that the April consumer price index rose 3.8% from a year ago, as surging energy prices compounded inflation by a surprise jump in shelter costs.

Core inflation was more subdued at 2.8% but still well above the Federal Reserve's 2% goal, likely keeping central bankers on hold as the impacts from the Iran war and President Donald Trump's tariffs play out.

— CNBC's Sean Conlon also contributed to this report.