Europe's STOXX 600 near three-week low as inflation worries weigh

European ​shares edged down to nearly a three-week low on Wednesday, as firmer oil prices and concerns over ‌rising inflation offset relief from easing bond yields after the U.S. Treasury announced more liquidity support for longer-dated debt.

Euro zone bond yields slipped after the U.S. Treasury said it would double the size of liquidity support for long-term debt. Global bond yields had reached multi-year highs on Tuesday, unsettling ​investors and leading to a sell-off in risk assets.

Germany's 30-year benchmark yield eased at least 1 basis point, while ​the 10-year bond yield was little changed. Long-end sovereign yields act as an anchor for the ⁠price of nearly every other asset in financial markets, including mortgage rates.

The move did little to improve risk sentiment, with ​inflationary pressures very much present for the energy-dependent Europe and dimming the prospects for its economic outlook.

"With oil above $90 a barrel, the ​inflationary concerns are lingering, the fiscal concerns regarding ballooning U.S. debt is still there," said Fiona Cincotta, senior market analyst at City Index.

Shipping slowed through the Strait of Hormuz - a crucial route for global energy supplies, data showed on Wednesday, as the U.S. and Iran made competing claims over ​whether the waterway was open.

The pan-European STOXX 600  closed 0.11% lower at 651.16 points.

The aerospace and defence sector  led losses ​with a 1.6% drop, while European banks slipped 1.5%.

"There are several headwinds that banks are facing... the latest developments surrounding the yields, concerns over ‌the ⁠economic outlook for the European economy and what that might mean for households and businesses as far as increased chances of a rate hike from the ECB," added Cincotta.

Traders in money markets are pricing in a 50-basis-point rate hike from the European Central Bank this year, according to LSEG data.