European Markets Steady Amid U.S. Fed Anticipation and Luxury Sector Struggle

European shares ended flat as investors remained cautious before the U.S. Federal Reserve's policy meeting. EssilorLuxottica, a major player in luxury eyewear, fell after Google's AI glasses announcement. Meanwhile, rising defence stocks offset declines in luxury, as focus shifted to upcoming rate decisions and economic forecasts.

European shares remained stable on Tuesday, reflecting investor caution ahead of a pivotal U.S. Federal Reserve meeting. The pan-European STOXX 600 index closed relatively unchanged at 578.11, with mixed performances in regional benchmarks. Notably, Germany's DAX increased by 0.5%, while France's CAC-40 declined by 0.7%.

EssilorLuxottica, the world-renowned Ray-Ban manufacturer, experienced a significant decline of 5.6% following Google's announcement of AI-powered glasses set to release in 2026 with Warby Parker. This anticipation resulted in a broader dip in luxury stocks, negatively affecting companies like Kering and LVMH. Conversely, defence stocks saw gains following news of upcoming German procurement contracts.

As markets keenly await guidance from the Fed, there is heightened anticipation of a 25-basis-point rate cut on Wednesday. Meanwhile, comments from the European Central Bank suggest potential tightening in Europe, contrasting the U.S.'s expected monetary easing. This divergence has influenced investor outlook amid multi-month highs in eurozone borrowing costs.

(With inputs from agencies.)