European Shares Slip as Banks, Insurers Fall Ahead of Fed’s Rate Decision

European shares fell slightly on Tuesday as cautious sentiment gripped markets ahead of the U.S. Federal Reserve’s closely watched policy announcement. The pan-European STOXX 600 index (.STOXX) slipped 0.13% to 555.42 points as of 08:22 GMT, pressured by rate-sensitive financial stocks. The banks index (.SX7E) and insurance index (.SXIP) each lost about 1%.

Investors are pricing in a 25-basis-point rate cut from the Fed on Wednesday, which would mark its first dovish move this year. Some traders, however, see chances of a larger 50-basis-point cut, raising concerns about deeper economic weakness.

“If the Fed did cut by 50 bps, it might suggest the jobs market and broader economy are weaker than expected. That could unsettle markets, which remain very sensitive to shifts in economic data,” said Rebecca Chesworth, senior equities strategist at State Street Investment Management.

Political interference concerns also linger. The U.S. Senate recently confirmed President Donald Trump’s nominee Stephen Miran to the Fed’s Board of Governors. Meanwhile, Governor Lisa Cook will take part in the meeting after a court blocked attempts to remove her.

In sector moves, recruitment firms tumbled after UK-based SThree (STEMS.L) forecast annual pre-tax profit below expectations. Shares plunged as much as 21%, touching their lowest since 2009. Peer companies also slid, with Hays (HAYS.L) and Randstad (RAND.AS) losing around 2.5% each, and Adecco down nearly 4%.

Luxury stocks provided some support, with the European luxury index (.STXLUXP) rising 0.9% to reach its highest level since late July. French luxury shares were in focus after the death of designer Giorgio Armani, whose will reportedly included guidelines for a potential sale of his fashion empire, giving preference to giants like LVMH (LVMH.PA), L’Oreal (OREP.PA), and EssilorLuxottica (ESLX.PA). However, L’Oreal slipped 2% after Jefferies downgraded the stock to “Underperform.”

Elsewhere, Schindler (SCHP.S) dropped 2.7% after an investor sold shares of the Swiss lift maker at an 8.4% discount through an accelerated bookbuilding process. By contrast, BNP Paribas (BNPP.PA) gained 0.3% in volatile trade after extending its guidance to 2028, signaling confidence in its long-term outlook.

With global equities closely watching the Fed, Wednesday’s decision is expected to set the near-term direction for risk assets.

(With inputs from agencies)