BRUSSELS/FRANKFURT/PARIS (dpa-AFX) - European stocks may drift lower at open on Wednesday after U.S. stock markets retreated from record highs overnight on apprehensions about the outlook for interest-rate cuts.
Some Fed officials are becoming more concerned about growing risks to the labor market, while others remain primarily worried about the possibility that above-target inflation could be pushed higher by tariffs and other policies.
Fed Governor Michelle Bowman said policymakers are in danger of falling behind the curve and need to act decisively to bring down interest rates as the labor market weakens.
Fed Bank of Atlanta President Raphael Bostic said he sees more inflation coming, underscoring that the U.S. central bank needs to remain on guard.
His Chicago counterpart Austan Goolsbee said the Fed should be cautious toward additional interest-rate reductions.
The Organization for Economic Co-operation and Development said in report that the full impact of the massive hike in trade tariffs announced by the U.S. is yet to be felt though early effects are becoming increasingly evident.
In economic releases, Germany's IFO Business Climate index along with a speech by the ECB's Machado may influence trading sentiment later in the day.
Across the Atlantic, a report on new home sales is due ahead of the release of more closely watched data later in the week, including Friday's PCE index report, which is the Fed's preferred inflation measure.
Meanwhile, President Donald Trump has cancelled a planned meeting with top Democratic leaders, raising the risk of a partial government shutdown beginning next week.
Asian markets were mixed while the dollar index rose slightly due to risk-off sentiment. Gold held steady after reaching a new record high the previous day.
Oil traded higher for a second straight session after industry data showed a drop in U.S. crude inventories, reinforcing concerns over tightening supplies.
Additionally, a deal to resume exports from Iraq's Kurdistan stalled, pacifying some investor concerns about oversupply.
U.S. stocks fell from record highs overnight, snapping a three-day winning streak amid doubts about the sustainability of the artificial intelligence bull trend.
Investors booked profits at higher levels after Fed Chair Jerome Powell signaled a cautious approach to future rate cuts and stated that equity prices are currently 'fairly highly valued' by many measures.
Powell also said the Fed is facing a 'challenging situation' and that there is no risk-free path' to achieve the central bank's dual mandate of maintaining full employment and price stability in the U.S. economy.
Meanwhile, a measure of U.S. business activity slowed for a second straight month in September, fueling concerns about the economic outlook.
The tech-heavy Nasdaq Composite lost 1 percent, the S&P 500 shed 0.6 percent and the Dow eased 0.2 percent.
European stocks closed mostly higher on Tuesday on Fed rate cut expectations. The pan-European Stoxx 600 rose 0.3 percent.
The German DAX edged up by 0.4 percent and France's CAC 40 added half a percent while the U.K.'s FTSE 100 finished marginally lower.
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