Europe close: Periphery stocks lag following latest political moves

European stocks were little changed on Tuesday as financial markets steadied following the weekend's attacks on a key Saudi oil processing facility and oilfield, albeit with investors treading cautiously ahead of the US Federal Reserve's policy decision scheduled for the next day.

By the end of trading, the pan European Stoxx 600 index down by just 0.05% at 389.93 as Germany's Dax dipped 0.06% to 12,372.61 and France's CAC 40 rose 0.24% to 5,615.51.

Milan's FTSE Mibtel was the outlier, retreating 0.76% to 21,801.93 after the Socialist PD party's former leader, Matteo Renzi, announced plans to form his own political party.

And after the close in Spain, following consultations with the country's main political leaders, King Philip VI announced that new elections would be called following the failure of the four major parties to agree on a coalition.

Spain's top flight index, the Ibex 35, gave back 0.53% to finish at 9,004.20.

Oil prices retreated following the previous session's sharp gains, with Brent Crude sliding 7.1% to $64.4 a barrel amid reports that Saudi oil output was set to come back onstream more quickly than feared.

Craig Erlam, market analyst at Oanda, said: "It's clear who the US believe is to blame for the attack, despite the Houthi rebels claiming responsibility but how they respond is yet unknown. We'll also learn in the coming days just how quickly the Saudis can get lost production back online and whether stocks will be called upon to fill the void.

"There's a lot of unknowns at the moment which is why we're seeing oil holding onto these gains."

Investors were also keeping an eye on Wednesday's meeting of the US Federal Reserve, with consensus expectations of a 0.25% cut to interest rates now viewed as less likely amid improved economic data and a thawing in US-China relations.

Joshua Mahony, market analyst at IG, said: "Markets fully expect a rate cut tomorrow, with the prospect of higher oil prices pointing towards further economic weakness given the drain on consumer spending and business margins."

"However, with the ECB now embarking on an open-ended QE programme, the comparative between the two sides could see the dollar rally if the FOMC continue to point towards a short-lived period of easing from the Fed."

Meanwhile, London's FTSE 100 dipped 0.01% to 7,320.40 as investors waited for the Supreme Court to rule on the legality of Prime Minister Boris Johnson's prorogation of parliament in the run-up to the Brexit deadline, with a decision expected on Thursday or Friday.

In macroeconomic news, the ZEW institute's economic sentiment index for Germany, which tracks analysts' expectations, improved to -22.5 in September, up from -44.1 in August and ahead of an expected reading of -32.2.

However, the current situation index fell to -19.9 in September from -13.5 the month before, missing expectations for a reading of -15.0 and marking the lowest reading since May 2010.

In corporate news, retailer Zalando led the Stoxx 600 lower as Kinnevik, its largest investor, sold 13.13m shares, or a 16.0% stake, in the German e-commerce retailer.

Stock in Swedish lawnmower firm Husqvarna followed close behind as its newly unveiled aims for 4-5% sales growth from 2020 underwhelmed investors.

Cembra Money Bank led the index's risers after analysts at Credit Suisse upgraded the Swiss lender from 'neutral' to 'outperform'.