European shares slide as banks, insurers drop

The pan-European STOXX 600 index closed down 1.15% to 550.73, with banks and insurance carrying losses between 2% and 2.1%

European shares dropped more than 1% at close on Tuesday, weighed down by rate-sensitive sectors.

The pan-European STOXX 600 index closed down 1.15% to 550.73 – a one-week low – with financials, banks and insurance carrying losses between 2% and 2.1%.

Germany’s DAX, France’s CAC 40 and Britain’s FTSE 100 also incurred sharp losses.

Meanwhile, the U.S. central bank’s two-day policy meeting is widely expected to conclude in a 25-basis-point interest rate cut on Wednesday, potentially the first dovish policy verdict this year following signs of a weaker U.S. job market. Some traders even see a potential 50-bps cut.

If the central bank did cut by 50 bps, you could interpret that things were worse than we thought they were, that the jobs market was slowing down or there was something happening with economic figures that we weren’t seeing, said Rebecca Chesworth, a senior equities strategist at State Street Investment Management.

That could be interpreted either way because we’re in a market which can flip very quickly,” she said.

The decision will also come at a time when investors have also been worried about political interference in the central bank’s independence.

U.S. President’s nominee Stephen Miran was sworn in to the bank’s Board of Governors on Tuesday, adding a new voice around the policy table, while bank governor Lisa Cook will also attend the meeting, as an appeals court blocked Trump’s efforts to fire her.

The market now is certainly awaiting not so much the interest rate decision of tomorrow, but will be looking for answers about future monetary policy, said Teeuwe Mevissen, senior market economist at Rabobank.