European shares hit two-week highs ahead of Fed rate decision

U.S. European stocks hit two-week highs on Tuesday as markets neared the expected start of the Federal Reserve’s monetary easing cycle that could see policymakers cut interest rates sharply.

The continent-wide STOXX 600 index rose 0.5% to 517.74 points, and Britain’s FTSE 100 outperformed its European peers with a 0.7% jump.

All sectors were trading higher, led by basic resources up about 1%, as greenback-priced copper edged higher on a softer dollar and expectations of a US rate cut.

Banks and travel stocks also boosted the market, each gaining 0.8%.

Investors will be fully focused on the Fed’s decision on Wednesday, with markets now pricing in a 67% chance that the US central bank could ease rates by 50 basis points.

“I think there is some volatility and nervousness in the market about the growth environment, maybe about politics. But overall really about the decisions of central banks,” said Yvan Mamalet, senior economic strategist at SG Kleinwort Hambros.

“I don’t think it’s just the Fed. I think the Bank of Japan’s decision over the weekend – the communication also leads to uncertainty and maybe even panic.”

Markets will closely monitor a German sentiment survey at 0900 GMT which is expected to show a slight deterioration in September and US retail sales, due at 1230 GMT, are forecast to have contracted in August on a monthly basis.

European Central Bank supervisor Claudia Buch and board members Elizabeth McCall and Frank Alderson will speak later in the day.

In stocks, Kingfisher was the top gainer, rising 7.1% after the European home improvement retailer raised the bottom end of its profit outlook for the full year.

Shares of Barry Callebaut rose 7% after Barclays raised the stock’s rating to “overweight” from “overweight”.

Sweden’s Thule Group slipped 6.7% to the bottom of the STOXX 600 as its second-quarter revenue fell and its debt rose.

Playtech fell 2.3% after the British gambling technology firm agreed to sell its Italian unit Snetech for 2.3 billion euros ($2.56 billion), including debt, to Flutter Entertainment, the world’s largest betting company.

Shares of Flutter were up 0.8%.

(Reporting by Shubham Batra in Bengaluru; Editing by Sherry Jacob-Phillips)