By Peter Nurse

Investing.com - European stock markets weakened Tuesday, continuing the negative start to the week with investors fretting about a worsening energy crisis ahead of the release of a highly anticipated U.S. inflation report.

By 03:40 AM ET (0740 GMT), the DAX in Germany traded 1.1% lower, the CAC 40 in France fell 0.8%, and the UK’s FTSE 100 dropped 0.5%.

Sentiment has been hit by worries about the region’s energy crisis as the biggest pipeline carrying Russian gas to Germany began 10 days of annual maintenance at the start of the week.

Fears are growing that Gazprom (MCX:GAZP), the Russian state-owned energy giant which runs the pipeline, will use this opportunity to extend the shutdown, especially as the European Union is preparing to impose a phased embargo on Russian oil and ban maritime insurance for any tanker that carries Russian oil.

Attention will turn later in the session to the release of the German ZEW economic sentiment index for July, which is expected to weaken substantially as growth slows in Europe’s leading economy.

In corporate news, Sosandar (LON:SOSS) stock rose 4% after the up-and-coming women's fashion group reported a "very strong" start to its 2023 fiscal year, with sales rising over 80% from a year earlier.

EDF (EPA:EDF) stock rose 6.5% following a Reuters report that the French government is going to have to pay at least 8 billion euros ($8 billion) to bring the power giant back under full state control.

DnB (OL:DNB) stock rose 0.4% after Norway’s biggest bank reported quarterly earnings above forecasts, supported by interest rate hikes and high activity levels in the Norwegian economy.

Elsewhere, markets remain nervous ahead of the release of the U.S. consumer price index on Wednesday. This is expected to show an 8.8% year-over-year increase, which would likely give the green light to the Federal Reserve to hike by 75 basis points later this month, matching June’s increase, which was the biggest increase by the U.S. central bank since 1994.

Oil prices fell Tuesday as fresh COVID restrictions in China, the world’s biggest importer of crude, weighed heavily on demand expectations.

Several Chinese cities are adopting fresh curbs to attempt to stop the spreading of the highly infectious BA.5 Omicron subvariant of the COVID-19 virus, with close to 30 million people now under some form of movement restrictions.

Strict lockdowns earlier in the year, primarily in the commercial hub of Shanghai, had a significant impact on the country’s economic activity and thus the demand for crude.