London: European stock inched higher on Tuesday as investors awaited this week`s US Federal Reserve policy meeting, while fears that violence in Iraq could disrupt energy supplies still weighed on sentiment.
London`s FTSE 100 index of top companies rose 0.06 percent to 6,742.19 points in afternoon trading.
Frankfurt`s DAX 30 gained 0.38 percent compared with Monday`s close to 9,921.78 points and in Paris the CAC 40 index gained 0.54 percent to 4,534.29.
The European single currency drifted down to $1.3543, from $1.3570 late in New York on Monday.
European markets staged a mild rebound following recent weakness on the back of the Iraq conflict.
All three major European indices had fallen on Monday after Islamist insurgents swept further into Iraq, with sentiment also clouded by Russia cutting gas supplies to Ukraine.
But Tuesday`s gains were tempered by mixed economic data out of the United States.
New US home construction and applications for building permits slowed sharply in May, while consumer prices posted the strongest monthly gain in more than a year, rising by 0.4 percent in May from April.
"The combined aspect of the two reports is enough to keep things looking confused in the capital markets," said Briefing.com analyst Patrick O`Hare.
Wall Street stocks opened lower Tuesday, with the Dow Jones Industrial Average falling 0.19 percent to 16,749.35 points after five minutes of trading.
The broad-based S&P 500 shed 0.15 percent 1,934.93 points, while the tech-rich Nasdaq Composite Index dipped 0.13 percent to 4,315.43.Wall Street had moved higher on Monday as investors weighed the Iraq crisis and merger news ahead of the looming Federal Open Market Committee (FOMC) decision due on Wednesday.
The "focus will increasingly... shift away from events unfolding in Iraq and the Ukraine to tomorrow`s FOMC meeting," said analyst Markus Huber at broker Peregrine & Black.
Investors are watching the Federal Open Market Committee`s policy meeting, which wraps up Wednesday with a policy statement and news conference with Fed Chair Janet Yellen.
The Fed is expected to keep its monetary policy on track, but investors are looking for clues on when the central bank will raise benchmark interest rates.
Asian equities ended mixed on Tuesday, with Shanghai hit partly by weak foreign investment figures, dealers said.
Tokyo stocks rose 0.29 percent and Seoul gained 0.40 percent.
But Shanghai slipped 0.92 percent, Sydney shed 0.21 percent and Hong Kong dropped 0.42 percent.
Foreign direct investment into China fell 6.7 percent year-on-year to $8.6 billion in May, the government said Tuesday.
"While not yet necessarily a new trend, very disappointing foreign investment data out of China is giving reason for concern and might be pointing towards further weakness in the Chinese economy in the months ahead," noted Huber.In foreign exchange activity, the British pound retreated on news of slowing inflation.
"The pound has dropped back as some traders scale back expectations of a 2014 (interest) rate hike," noted IG analyst Chris Beauchamp.
Britain`s 12-month inflation rate slowed to 1.5 percent in May, the lowest level for four and a half years, official data showed, reducing pressure on the Bank of England to raise interest rates from their record low.
In reaction, the pound dipped to $1.6952, down from $1.6979 on Monday -- when it had briefly hit a five-year high above $1.70 on hopes of an interest rate hike within the next six months.
The euro, meanwhile, slipped to 79.89 British pence from 79.91 pence.
The latest figures mark the sixth month in a row when the rate has been at or below the Bank of England`s 2.0-percent target.
The BoE has kept its key interest rate at a record low 0.50 percent since March 2009, in order to stimulate economic growth.
