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British banks slide after think tank report

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German inflation rises more than expected in August

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US reports solid July consumer spending; core inflation

firmer

(Updates after markets close)

By Medha Singh and Sukriti Gupta

Aug 29 (Reuters) - European shares closed lower on

Friday, hitting their lowest in over two weeks, weighed down by

British banks, while investors assessed economic data in the

U.S. and the euro zone.

Natwest ( NWG ) dropped 4.8%, while Barclays ( BCS ) and

Lloyds shed 2.2% and 3.4%, respectively, as a think

tank recommended Britain's government should tax banks on the

billions of pounds they receive in interest from the Bank of

England on the reserves they hold at the central bank.

This weighed on the broader banks index, down 0.9%.

The index logged its sixth session of declines, its longest

losing streak since October 2023.

The pan-European STOXX 600 closed 0.6% lower,

registering its first weekly loss in four, with questions over

the independence of the U.S. Federal Reserve and political

uncertainty in France weighing on the index. However, it rose

for the second consecutive month.

Fed independence has come into focus as President Donald

Trump has stepped up his campaign to exert more influence over

monetary policy, including his attempt to fire Governor Lisa

Cook. Cook filed a lawsuit on Thursday saying Trump has no power

to remove her from office.

Meanwhile, data showed the U.S. Personal Consumption

Expenditures Price Index rose 2.6% in July on an annual basis,

as estimated, suggesting a mild impact of tariffs on inflation.

However, it is not expected to prevent the Federal Reserve

from cutting interest rates next month against the backdrop of

softening labour market conditions.

"It remains the base case that they (Fed) will cut interest

rates in September, but the higher inflation reading does put a

seed of doubt into that," said Kiran Ganesh, multi-asset

strategist at UBS Global Wealth Management.

FRENCH WOES

Major regional bourses also closed lower, with Germany's DAX

down 0.6%.

German inflation accelerated more than expected in August

while unemployment topped 3 million for the first time in a

decade. French consumer prices rose slightly less than

anticipated in August.

European technology stocks lost the most, tracking

U.S. peers. ASML fell 2.7% and SAP fell

1.9%. Conversely, defence stocks were higher with the broader

index up 0.4%.

France's CAC 40 has shed 3.3% this week, lagging

regional peers, on concerns over a potential collapse of Prime

Minister Francois Bayrou's government next month.

In September, the ECB is expected to keep rates on hold,

mirroring its July meeting, after delivering eight rate cuts

since mid-2024.

Renewable energy companies Orsted and Vestas

Wind ( VWSYF ) closed 3.3% and 3.1% lower respectively. The U.S.

administration said it was cancelling $679 million in federal

funding for 12 offshore wind projects.

Remy Cointreau fell 4.1%, even as the French

spirits maker raised its full-year 2025/26 profit outlook.