FX.co ★ European Shares Seen Higher As Fed Prepares To Cut Rates

European stock markets are expected to open higher on Tuesday as the U.S. Federal Reserve begins its two-day policy meeting later today.

Anticipation is high that the Fed will cut interest rates, although the extent of the cut is still under discussion. According to the CME Group's FedWatch Tool, there is currently a 65% probability of a 0.50% rate cut and a 35% likelihood of a 0.25% adjustment.

The upcoming U.S. retail sales data for August, scheduled for release later in the day, could influence the Fed's decision. Regardless of the immediate cut's size, the Federal Reserve is expected to continue reducing rates throughout the year.

Asian markets showed mixed results, with Hong Kong's Hang Seng index climbing 1.4% on optimism about potential Chinese economic stimulus. Conversely, Japan's Nikkei fell nearly 2% as the yen maintained its strength against the U.S. dollar for the sixth consecutive day. Markets in mainland China and South Korea were closed due to public holidays.

Meanwhile, the U.S. dollar and Treasury yields faced selling pressure, gold prices dipped from recent highs, and oil prices extended overnight gains amid concerns about Hurricane Francine's potential impact on output in the U.S. Gulf of Mexico.

U.S. stocks delivered mixed performances overnight, with technology stocks underperforming and the dollar declining in advance of multiple central bank meetings this week. Manufacturing activity in the New York region expanded for the first time in nearly a year, according to a recent survey. The Dow rose 0.6% to a record close, the S&P 500 edged up 0.1%, while the tech-heavy Nasdaq Composite dropped 0.5%.

In Europe, stocks mostly fell on Monday after a three-day winning streak, as indications of a worsening economic slowdown in China emerged. The pan-European STOXX 600 index slipped 0.2%, Germany's DAX declined 0.4%, and France's CAC 40 dropped 0.2%, though the U.K.'s FTSE 100 remained flat with a slightly positive tendency.