Europe close: Stocks slip as global markets await Fed decision

European stock markets opened the new week with small losses as investors scaled back their appetite for risk ahead of an anticipated rate cut from the Federal Reserve.

Despite a brief stint in positive territory, the Stoxx 600 index finished 0.2% lower at 514.94, with gains in London and Madrid outweighed by losses in Frankfurt, Paris and Milan.

With no major economic data scheduled in Europe, global markets were firmly fixed on the upcoming two-day policy meeting Stateside, which ends on Wednesday.

While an easing of monetary policy has been widely expected for some time, the jury's still out on the size of potential rate cut, with investors divided between a 25 basis-point (bp) and 50bp reduction in the Federal Funds Rate.

“Last week saw a late surge in expectations around a 50bps rate cut, a recognition that the Fed’s window to ease policy is limited by the election. Recession fears have spiked dramatically, and investors have an unnerving feeling that the Fed is firmly behind the curve," said Chris Beauchamp, chief market analyst at IG.

"A 50bps move might help to stop that perception from spreading further, though [Fed chair] Powell will have to perform a delicate balancing act to avoid giving the impression that they are more concerned about the near-term outlook.”

Market movers

Shares in Rexel surged 9% after the French electrical parts company rejected a takeover offer from US company QXO of up to €28.40 a share, saying it significantly undervalued the company.

Playtech rose 14% after the UK gambling technology maker said it had struck a revised deal with Mexican gambling operator Caliente Interactive over their Caliplay joint venture, and said annual adjusted earnings would be slightly ahead of expectations.

Also in London, Phoenix Group slumped 5% as the pensions, savings and life insurance provider underwhelmed with a 15% increase in first-half operating profits and said it was pulling the disposal of its SunLife division.

Elsewhere, Worldline shares were on the slide again, down 14% after the French payments company on Friday it announced the departure of its chief executive and issued a profit warning.