Europe open: Markets mixed as oil pulls back, Fed meeting eyed

European stocks were mixed on Tuesday morning as markets steadied after the drone attacks on Saudi oil processing facilities, while investors remained cautious ahead of Wednesday's US Federal Reserve meeting.

At 0856 BST, the pan European Stoxx 600 index was flat at 389.44 as Germany's Dax dropped by 0.1% to 12,369.80 and France's CAC 40 rose by 0.2% to 5,611.53.

Oil prices retreated from sharp gains made in the previous session, with Brent Crude down 0.55% to $68.64 a barrel and West Texas Intermediate down 1.06% at $62.24.

Shares in oil and gas producers were also lower after the Trump administration hinted that it might release crude reserves, easing supply worries.

CMC Markets analyst Michael Hewson said even by recent standards in the Middle East, Monday’s sharp rise in oil prices was an "historic move".

"The size of the move has raised concerns that if sustained a rise in prices could prompt further weakness in a global economy already vulnerable to concerns about slowing demand."

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.

Connor Campbell, market analyst at Spreadex, said: "What was once a certain rate cut has seen some doubt creep in, thanks to improving relations between the Washington and Beijing and a one-year high US core inflation reading. The European, and later US, indices, then, will be forgiven for playing it a bit safe on Tuesday."

Meanwhile, London's FTSE 100 was as flat as a pancake 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.

In corporate news, retailer Zalando led the Stoxx 600 lower as Kinnevik, its largest investor, sold 13.13m, or a 16% stake, in the German ecommerce retailer.

(Writing by Frank Prenesti; Editing by Michele Maatouk and Josh White)