By Sara Sjolin, MarketWatch
European stocks swung between small gains and losses on Tuesday, with investors staying cautious ahead of this week’s Federal Reserve meeting that will be scrutinized for hints on future U.S. monetary policy.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.18% ended marginally higher at 382.12, after trading in a relatively tight range during the session.
Among biggest decliners in the pan-European index, shares of Heineken NV /zigman2/quotes/205347870/delayed NL:HEIA +0.04% slumped 3.8% after Mexico’s Femsa /zigman2/quotes/208725895/composite FMX +1.45% /zigman2/quotes/202030523/delayed MX:FEMSAUBD +0.56% late Monday said it is selling a 5.24% stake in the Dutch brewer.
Fed in focus: Traders in Europe were waiting for the U.S. Fed to provide its policy update on Wednesday, which could affect multiple asset classes, such as stocks globally, currencies and gold. The two-day meeting kicks off on Tuesday.
The central bank is widely expected to keep rates on hold, but to start unwinding its $4.5 trillion balance sheet.
“With investors still re-evaluating the Federal Reserve’s ability to raise U.S. interest rates in December, attention will be directed towards Janet Yellen and her thoughts on the recent inflation trends in the U.S.,” said Lukman Otunuga, research analyst at FXTM, in a note.
“A hawkish Yellen, who leaves the door open for another rate hike before year-end, is likely to offer the dollar a lifeline,” he added.
If the dollar rises against the euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0543% and pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.4418% it can give a boost to European equities, as it means eurozone and British goods and services become cheaper for American businesses and consumers to purchase.
The euro bought $1.1978 on Tuesday, up from $1.1954 late Monday in New York. The pound traded at $1.3514, up from $1.3494 on Monday.
European economic news: France cut its budget-deficit forecasts for this year and next after taking austerity measures over the summer and as economic growth has been stronger than initially expected.
In Germany, the ZEW economic expectations index jumped to 17.0 in September, up from 10.0 in August and beating forecasts of a 12.7 reading.
“The German federal elections do not seem to have been a source of uncertainty. The worries about the recent strengthening of the euro has, for now, also faded into the background,” said ZEW President Professor Achim Wambach in the release.
The Germans head to the polls on Sunday in a general election where Angela Merkel widely is expected to win a fourth term as chancellor. The big question, however, is who she chooses as her coalition partner, as that is seen as potentially having an impact on eurozone reforms and fiscal rules in the currency union.
Indexes: Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX -0.63% ended slightly higher at 12,561.79, while France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 -0.52% gained 0.2% to 5,237.44.
Movers: Shares of J Sainsbury PLC /zigman2/quotes/206038250/delayed UK:SBRY +1.61% rose 2.6% even as the grocer lost market share in the 12 weeks to Sept. 10.
Ocado Group PLC /zigman2/quotes/207225647/delayed UK:OCDO +1.26% fell 2% as the online grocery-delivery company said average order size during the 13 weeks to Aug. 27 fell 1.2%, compared with the year-ago period. Overall, Ocado’s revenue rose 14% during the fiscal third quarter.
Shares of Hugo Boss AG /zigman2/quotes/205761551/delayed DE:BOSS -0.60% fell 3.6% after Morgan Stanley downgraded the German fashion retailer to underweight from equal-weight.
In the opposite direction, Morgan Stanley lifted its rating on Metso Oyj /zigman2/quotes/204331732/delayed FI:METSO -1.37% to equal-weight from underweight, sending the shares 5.8% higher.
Telia Co. AB /zigman2/quotes/208009172/delayed SE:TELIA -0.05% picked up 2.7% after the Scandinavian telecom operator sold its final 7% stake in Turkcell Iletism Hizmetleri AS /zigman2/quotes/204089103/composite TKC +0.70% , raising 1.78 billion Turkish lira ($513.4 million).