On the other side of the Atlantic, Wall Street stocks finished a choppy session with modest gains.

US equities started the week strongly before giving up most gains as the yield on the 10-year US Treasury note, a proxy for inflation and interest rates, climbed above three per cent.

Investors are especially focused on Friday's consumer price index report, seen as an important input into the Federal Reserve's next moves

"Friday's inflation report will likely show that inflation is not easing just yet, but that the odds of a recession are still low," said Oanda's Edward Moya.

"Wall Street will need to wait for a couple more inflation reports after this one before anyone can confidently make a call as to when the Fed may alter their tightening course."

Traders took heart also from a wind-down of Covid containment measures in China that have crippled its economy for months.

With infections trending down in major cities, including Shanghai and Beijing, authorities have allowed some sense of normality to return, raising hopes for a pick-up in consumer activity.

"Positive news around Chinese economic activity and cheaper equity valuations could offer value from a long-term investment perspective, but volatility will remain high in the short-term," said Diana Mousina, of AMP Capital.

In foreign exchange, the British pound was higher heading into the confidence vote on Johnson's leadership, maintaining the gains after the outcome was announced.

Johnson needed the backing of at least 180 MPs to survive the challenge -- a majority of the 359 sitting Conservatives in parliament. While 211 Tory MPs backed him, 148 did not.

Johnson's public image has suffered in the past year, most notably over the "Partygate" controversy that saw him become the first serving UK prime minister found to have broken the law.

The Conservative government has come under pressure also from a cost-of-living crisis in Britain as UK inflation stands at the highest level in four decades, driven by surging oil and gas prices.

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