Picture used for illustrative purpose. File

European stocks struggled for direction on Tuesday, with banking shares declining ahead of the US and UK central bank meetings this week.

The broader retail index rose 1.4%. The pan-European STOXX 600 was flat.

Markets remained rangebound ahead of the conclusion of the US Federal Reserve's monetary policy meeting on Wednesday, the first since Chairman Jerome Powell unveiled a shift toward greater tolerance of inflation, effectively pledging to keep interest rates low for longer.

"It would be of no surprise if an expectedly uber-dovish FOMC re-energised the buy everything FOMO trade to some degree," wrote Jeffrey Halley, senior market analyst at Oanda. 

READ MORE 

Asian markets mixed after Wall Street rises on dealmaking

Gold hits near 2-week high on softer dollar; focus on Fed meeting

Tokyo stocks close down on profit-taking

"We can expect more range trading ahead of the decision." 

The Bank of England is also set to meet on Thursday, and likely to signal that it is getting ready to pump more stimulus into Britain's coronavirus-hit economy.

UK's FTSE 100 rose 0.1%, barely reacting to data that showed unemployment rate rose 4.1% in the three months to July - the first time since the coronavirus lockdown began in March - although it was in line with economists' expectations.

Euro zone banks slid 1.5%, the most among sectors. ECB board member Fabio Panetta became the latest to highlight risks from a strong currency, saying the results of its stimulus measures are "not fully satisfactory yet."

Meanwhile, a paper seen by Reuters showed France and Germany have called on the European Union to ease bank capital and bonus rules to avoid crimping the flow of credit to an economy trying to recover from the coronavirus crisis.

Reuters