European stocks extended losses on Wednesday, as negative sentiment from the previous trading session continued to weigh on major bourses in the region. The pan-European Stoxx 600 index dropped by 0.52% at 10:42 a.m. London time, with technology stocks taking a significant hit, falling by 2.84%. However, the banking sector managed to rise by 0.64%.

Shares of Dutch semiconductor company ASML suffered a sharp decline of 6.7% after Bloomberg reported that the United States is considering imposing stricter trade restrictions on chip equipment firms exporting their technology to China. This news added to geopolitical uncertainty, which has been weighing on the broader chip sector.

In the UK, inflation remained steady in June, according to the data released by the Office for National Statistics on Wednesday. The annual basis inflation rate stood at 2%, slightly surpassing the forecasted rate of 1.9%. Notably, this figure aligns with May's inflation rate of 2% and falls within the target rate set by the Bank of England.

Following this release, the British pound surged above the $1.3 level against the US dollar for the first time in a year, as market participants reduced bets on a potential rate cut from the Bank of England in August. Analysts are anticipating a period of growth-friendly policies and political stability in the UK, under the newly elected Labour government.

Looking globally, Dow futures demonstrated little change on Tuesday night, while Asia-Pacific markets exhibited mixed trading patterns. Australia's S&P/ASX 200 index reached an all-time high. In Europe, earnings announcements are expected from ASML, Mulberry Group, and Handelsbanken on Wednesday.

The developments in the European stock market reflect the ongoing uncertainties surrounding trade tensions and their impact on key sectors. Investors will closely monitor the outcome of discussions between the US and China, as well as the overall geopolitical climate, to gauge the future direction of these markets.