European shares take a breather, focus shifts to Fed

European shares fell for the first time in seven sessions on Tuesday as weak earnings dampened optimism surrounding the US-China trade progress and ahead of an expected interest-rate cut by the US Federal Reserve later this week. The pan-European STOXX 600 fell 0.4% at 0920 GMT after scaling a 21-month high in the previous session, tracking gains on Wall Street, where the benchmark S&P 500 hit a record high.

"Investors seem to be taking some money off the table given how strong markets have been," said David Madden, analyst at CMC Markets. "We tend to see a pullback from time and time and this is exactly that." The Helsinki index underperformed the broader market as Finnish paper firm Stora Enso's slumped 9% as its quarterly profit dropped and it warned of global political uncertainties. Peers Mondi and Smurfit Kappa also fell following the results.

The oil and gas sector fell 0.5%, dragged down by British energy firm BP, which reported a sharp drop in third-quarter profits, hurt by weaker oil prices and lower production. Also weighing on the sector was British oilfield services firm Hunting, down 3.5%, after the company said it sees annual core profit at the lower end of market expectations as it grapples with a slowdown in the US onshore drilling market.

Financials were pulled lower by a 2.4% drop in Deutsche Boerse after the German exchange operator missed its third-quarter profit forecasts. Expectations were low going into the European corporate earnings season, but after its three busiest weeks the overall picture has been slightly better than expected with companies pulling off modest beats.

Banks were dragged lower by shares of Swedbank , which fell nearly 4%, after Estonia's financial regulator said it decided to open a misdemeanor case with regard to the Estonian subsidiary of the Swedish lender. Among positive movers, shares of German healthcare group Fresenius gained 5% to top the STOXX index after beating revenue expectations on strong sales in emerging markets and growth in its dialysis unit.

The catalyst for markets this week is expected to be the Fed meet where officials are expected to cut interest rates for the third time this year, but focus will squarely be on further clues from the central bank on the policy path ahead. "Markets are 90% pricing in a cut," said CMC's Madden. "I don't think they'll be leaving the door open for another cut in 2019 or early 2020 because that could just be setting that every time the markets fear a recession, a rate cut is warranted."