PARIS - European stock markets edged higher Tuesday after a mixed showing in Asia, as traders grew increasingly concerned by the lack of a US debt deal necessary to avert a default.
Sentiment was weighed also by data showing China's economic recovery remained sticky, with key indicators missing expectations owing to weak domestic demand.
Oil prices nudged up, while the dollar dropped against main rivals.
"Concerns are rising that not enough progress is being made to avoid a US default, which would send shockwaves through financial markets," noted Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Elsewhere, "China's pandemic snapback is losing elasticity, adding to worries about growth unravelling across the global economy".
Separate data Tuesday showed UK unemployment edging higher as inflation remains elevated.
In the United States, Treasury Secretary Janet Yellen has again said the government would likely run out of cash on June 1, meaning it would not be able to meet its debt repayment obligations, sparking a potentially devastating default.
While there is a general feeling that a debt agreement will be reached, Republican House Speaker Kevin McCarthy has warned that staff-level meetings were "not productive at all" and they were "nowhere near reaching a conclusion".
Republicans are demanding spending cuts as a condition for passing the bill while Democrats want a "clean" increase of the borrowing limit with no strings attached.
US President Joe Biden, who has expressed confidence the two sides can bridge the gap, is scheduled to meet with McCarthy and other congressional leaders at the White House later Tuesday.
Meanwhile, two top Federal Reserve officials suggested they were in favour of pausing the US central bank's interest rate-hiking drive next month.
Chicago Fed boss Austan Goolsbee said he wanted to wait for the effects of more than a year of increases aimed at bringing inflation down from multi-decade highs.
"There is still a lot of the impact of the 500 basis points we did in the last year that's still to come," he told CNBC.
"And you add on that there are tight credit conditions, and I think that we should be extra mindful."
Atlanta Fed president Raphael Bostic added that he favoured staying put at the June meeting, though he threw cold water on any hope for a cut before the end of the year.
But Minneapolis Fed President Neel Kashkari said monetary policymakers still had plenty of work to do to rein in prices, citing the still strong labour market and the fact that inflation, at five percent, remained well above the bank's two percent target.