UK's FTSE 100 extended losses on Thursday as investors were anxious about further monetary tightening by the Bank of England, while Cineworld rose on expectations that it would soon exit bankruptcy.
Cineworld Group Plc added 4.7% in volatile trading after the world's second-largest theatre operator said it expects to emerge from bankruptcy protection in July after its restructuring proposal received the support of lenders.
The blue-chip FTSE 100 slid 0.6% and touched a near two-month-low after hotter-than-expected inflation data on Wednesday stoked worries of the BoE staying hawkish.
"We saw CPI still very high and above expectations and now the UK has the highest risk of stagflation compared to (other economies)," said Daniela Hathorn, senior market analyst at Capital.com.
"The general feeling is that the BoE doesn't really have it under control since it has been one of the most lenient with inflation."
Markets were also in a glum mood as the deadline on the U.S. debt default drew closer with no deal in sight.
UK equities have traded within tight limits since late April as investors digested corporate earnings amid U.S. debt deal uncertainties.
With domestic inflation still remaining a major concern for the BoE, rate hike expectations and fears of a slowdown are expected to dominate market sentiment.
The FTSE 250 fell 0.6%, weighed down by a 4.4% drop in Pets At Home Plc after the pet care firm reported a dip in annual pretax earnings.
United Utilities Group Plc slipped 0.2% after the water company swung to an annual pre-tax loss due to high costs.
Tate & Lyle Plc jumped 2.3% after the sweetener-maker reported a surge in annual profits, aided by higher prices.
Qinetiq Group Plc climbed 1.5% after posting a rise in annual revenue and profit, and lifting its annual dividend.
Johnson Matthey Plc shed 3.4% after the autocatalyst maker reported a fall in annual profit. (Reporting by Johann M Cherian in Bengaluru; Editing by Sonia Cheema and Shailesh Kuber)