[NEW YORK] European shares closed 0.1 per cent lower, dragged down by mining, banks and luxury stocks, which followed Asian luxury stocks in falling on a new spike in Covid-19 cases in Fujian, China.

The US Labour Department said on Tuesday its Consumer Price Index (CPI) was up just 0.1 per cent last month, compared to an expected increase of 0.3 per cent. That was the smallest gain in six months, and it indicated that inflation has probably peaked.

However, concern that inflation could remain high for a prolonged period has pressured stocks in September, and the data included warning signs that some bottleneck issues have not entirely gone away.

"Today's CPI data came in a bit weaker than expected, but (the Producer Price Index) is at a record high and inflation continues to be a key challenge for investors," said David Petrosinelli, Senior Trader at InspereX.

The US Federal Reserve will meet next week. The August CPI data lifts some of the pressure the Fed faced to announce it would begin tapering its massive bond-buying program.

Further delaying this key Fed announcement is "distorting"the economy and throwing off markets, said BlackRock's chief investment officer of global fixed income Rick Rieder.

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"Continuing to stimulate demand higher increases the risk of a severe supply/demand mismatch across economic as well as financial assets," said Rieder, also the head of BlackRock's global allocation team.

REUTERS