(Sharecast News) - European stocks retreated on Tuesday as investors paused to assess risks ahead of the US Federal Reserve's policy decision later this week.
The pan-European Stoxx 600 slipped 0.22% to 575.76, while Germany's DAX eased 0.12% to 24,278.63 and France's CAC 40 fell 0.27% to 8,216.58.
London's FTSE 100 bucked the trend, rising 0.44% to 9,696.74, supported by gains in major banks and energy firms.
Global markets took a breather from their record-setting streak as investors braced for a heavy week of central bank meetings and major earnings.
"Asian markets dipped, and European futures signalled a weaker start," said Patrick Munnelly, market strategy partner at TickMill, earlier noting that recent gains had been driven by easing trade tensions.
However, he warned that optimism faces a test as investors await the Fed's decision and quarterly updates from tech giants such as Amazon and Microsoft.
Markets were cautious ahead of Wednesday's meeting, where economists widely expect a 25-basis-point rate cut amid concerns over slowing job growth and stubborn inflation pressures linked to US president Donald Trump's global tariff campaign.
"A cut is widely expected," said AJ Bell investment director Russ Mould, "but, with most US data releases paused thanks to the shutdown in Washington, the Federal Reserve's ability to make an informed decision is impaired."
Attention also turned to Trump's upcoming meeting with Chinese president Xi Jinping in South Korea, seen as a key test of efforts to ease trade tensions.
Consumer confidence falls more than expected in Germany
German consumer confidence data underlined the fragile mood.
The forward-looking GfK consumer climate index for November fell more sharply than expected to -24.1 from a downwardly revised -22.5 in October.
"The ongoing tense geopolitical situation, increasing fears of inflation, and again growing concerns about jobs are destroying hopes for a short-term recovery in consumer climate," said Rolf Buerkl of the Nuremberg Institute for Market Decisions.
In the UK, shop price inflation slowed to 1.0% year-on-year in October from 1.4% in September, according to the British Retail Consortium and NielsenIQ.
"Signs of easing inflation in British shops helped further improve the mood of investors and saw the FTSE 100 post a new record level in early trading on Tuesday," said Mould.
"The rapid turnaround in sentiment can be seen most clearly in the performance of gold which having moved to nearly $4,400 is now back below $4,000."
In the US, private-sector job growth showed tentative signs of recovery.
ADP's new weekly dataset indicated average gains of 14,250 jobs per week over the four weeks to 11 October, implying monthly growth of around 55,000 following September's contraction.
The update came as the Fed weighs labour softness against lingering inflation risks.
HSBC rises in London, Philips and Novartis a drag
On the corporate front, HSBC shares advanced after the bank's net interest income beat expectations, offsetting a $1.1bn legal hit linked to a Luxembourg lawsuit involving the Bernard Madoff Ponzi scheme.
"Having got the bad news out of the way early," Mould said, "HSBC had some good news to deliver to investors with its third-quarter update."
He described double-digit growth in net interest income as "significant," backing up CEO Georges Elhedery's assertion that HSBC is becoming "a simple, more agile, focused bank."
In contrast, Novartis fell after quarterly earnings disappointed investors.
"Swiss pharmaceutical firm Novartis may have met forecasts thanks to decent growth in its new drug portfolio," Mould said, "but investors focused instead on the sharp slowdown in its blockbuster heart drug Entresto thanks to pressure from generics in the US market."
BNP Paribas declined even as its pre-tax profits of 4.28bn beat forecasts, with the bank flagging a "specific credit situation" that raised risk costs in its Global Markets unit.
Philips tumbled after the US Food and Drug Administration issued a warning over manufacturing standards at three of its facilities.
Reporting by Josh White for Sharecast.com.
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