Nov 25 - European shares were subdued on Tuesday as investors turned cautious ahead of the release of U.S. economic data, even as expectations of interest rate cuts in the world's largest economy rose. The pan-European STOXX 600 (.STOXX), opens new tab was down 0.2% at 562.06 points by 0934 GMT. Major regional bourses were also lower, with Germany's DAX (.GDAXI), opens new tab and France (.FCHI), opens new tab down 0.4% and 0.1%, respectively.
Markets await the release of a producer inflation report and retail sales figures in the U.S., among the first major datasets to be released following the longest ever government shutdown, which left markets and the Federal Reserve navigating a data gap.
"This is going to be the first sort of real insight that we'll be getting into how the economy held up across that long shutdown, so understandably, there is an element of caution," said Fiona Cincotta, senior market analyst at City Index.
The data comes after Fed Governor Christopher Waller suggested that continued weakness in labour data could warrant another quarter-point reduction in December, supporting New York President John William's comments.
Consumer discretionary stocks were the biggest laggards on the benchmark, with travel and leisure (.SXTP), opens new tab and automobile stocks (.SXAP), opens new tab down 0.9% and 0.7%, respectively.
On the flip side, industrial stocks (.SXNP), opens new tab gained 0.1%, led by defence firms. The broader European defence sector (.SXPARO), opens new tab was up 0.9%. It had dropped over 5% in the last two sessions, on expectations that a Russia-Ukraine peace deal was close.
"The latest headlines are just raising questions over whether that peace agreement will actually be achieved, which is why we're seeing a recovery in the defence sector," said Cincotta.
The STOXX index has retreated from its mid-November record highs, swept up in a sell-off in global risk assets, as concerns over an overheated AI-driven rally and expectations that the Fed might hold off on a December rate cut soured investor sentiment. In other stocks, Kingfisher (KGF.L), opens new tab rose 5% and was among the top gainers on the STOXX 600 after the home improvement retailer upgraded its full-year profit outlook.
Beazley (BEZG.L), opens new tab slumped 10% to be among the worst STOXX 600 performers after cutting its written premium outlook, citing intensifying competition and weak growth in cyber insurance.
London's Compass Group (CPG.L), opens new tab lost 3% despite beating annual revenue and profit expectations. Thyssenkrupp Nucera (NCH2.DE), opens new tab fell 7.6% after projecting sharply lower sales in 2026. It is majority-owned by Germany's Thyssenkrupp (TKAG.DE), opens new tab, down 3.6%.
A spokesperson for the Spanish stock exchange said the stock market was trading normally, but index values were not displayed to a technical error
