UKX FTSE 100 Index

By Carla Mozee, MarketWatch

European stocks flipped higher Tuesday, aided by a pullback in the euro's value on the back of a disappointing reading on German business sentiment. As well, a drop in the pound after a slowdown in British inflation helped lift U.K. blue-chip stocks.

Stocks had earlier slipped as investors appeared to hesitate after a tech-led selloff hurt the regional market in the prior session, and as financial markets prepare for a possible interest-rate hike by the Federal Reserve.

How markets are moving

The Stoxx Europe 600 index rose 0.3% to 374.84 after losing as much as 0.2% intraday. The financial and basic materials sectors led advancers. Utility and health care shares fared the worst. On Monday, the index slumped 1.1% (http://www.marketwatch.com/story/european-stocks-build-on-losses-as-micro-focus-shares-plunge-2018-03-19) .

The export-heavy DAX 30 in Germany rose 0.2% to 12,234.15, and the U.K.'s FTSE 100 indexgained 0.3% at 7,064.16 (http://www.marketwatch.com/story/ftse-100-rises-off-15-month-low-ahead-of-inflation-data-2018-03-20).

Spain's IBEX 35 pared its loss to 0.1% at 9,654.60 and France's CAC 40 index was little changed at 5,224.89.

The euro fell to $1.2237 from $1.2336 late Monday in New York. Against the pound, the shared currency was down roughly 0.3% at GBP0.8780.

The pound fell to $1.3993 from $1.4025.

Check out:Pound could surge in 'frenetic' week of Brexit and BOE news, ING says (http://www.marketwatch.com/story/pound-could-surge-in-frenetic-week-of-brexit-and-boe-news-ing-says-2018-03-16)

What's driving markets

Stocks across the region have seesawed during the session. But equities returned to positive territory as the euro fell below the $1.23 handle. Euro strength can pressure shares of European exporters as a stronger euro can reduce revenue and earnings made overseas by such companies.

The euro's decline came after widely watched German sentiment survey from think tank ZEW said its economic sentiment index fell to 5.1 in March, below forecasts of a 13.1 reading, and down from 17.8 in February.

"Concerns over a U.S.-led global trade conflict have made the experts more cautious in their prognoses. The strong euro is also hampering the economic outlook for Germany, a nation reliant on exports," said ZEW President Professor Achim Wambach in a statement. "Combined with the experts' continued positive assessment of the current situation, however, the outlook is still largely positive."

A drop in the pound also provided support for U.K.-listed multinational companies, with that move made after British inflation in February slowed to 2.7% from 3% in January. That was below the 2.8% rate expected in a FactSet consensus estimate.

The euro and the pound had risen Monday against the U.S. dollar after the EU and the U.K. agreed on the broad terms of a two-year Brexit transition period (http://www.marketwatch.com/story/eu-agrees-on-two-year-brexit-transition-deal-2018-03-19), but those moved weighed on regional equities.

European stocks earlier Tuesday appeared to take their cue from a downturn in U.S. stock futures , indicating Wall Street was setting up for another drop (http://www.marketwatch.com/story/techs-on-track-to-drag-down-us-stocks-for-a-second-day-as-facebook-keeps-sliding-2018-03-20). Shares of Facebook (FB) and Oracle (ORCL) fell premarket following a slide in tech stocks on Monday that also bled into European stocks.

For its part, Facebook Inc. (FB) is coming under official scrutiny over its use of member data.

Read:Cambridge Analytica caught on hidden camera pitching bribes and sex workers (http://www.marketwatch.com/story/cambridge-analytica-caught-on-hidden-camera-pitching-dirty-tricks-2018-03-19)

The Federal Reserve's policy decision on Wednesday is on the radar, with markets pricing in a hike in interest rates by the central bank. The Fed will begin its two-day meeting on Tuesday.

Investors worldwide watch Fed rate policy, as higher U.S. interest rates can make riskier assets such as stocks less attractive -- and because many companies do business in the word's largest economy. The Bank of England is expected to hint at a rate rise when its policy decision is released Thursday.

Read:Trump's most market-rattling trade blasts are still to come, warns Pimco (http://www.marketwatch.com/story/trumps-most-market-rattling-trade-blasts-are-still-to-come-warns-pimco-2018-03-16)

What strategists are saying

"Investors should not only be worried about the drop in Facebook equities, but also about FAANG stocks, which have been leading the bull market for many years," said Hussein Sayed, chief market strategist at FXTM, in a note.

"Concerns that the European Commission will impose new taxes on tech firms in retaliation for U.S. steel and aluminum tariffs is an early indication that the trade war should be taken more seriously. If markets decided to turn on FAANG stocks, we would likely see a similar reaction to last February's correction," he said.

Don't miss: What to expect from the new Fed dot plot on interest rates (http://www.marketwatch.com/story/what-to-expect-from-the-new-fed-dot-plot-on-interest-rates-2018-03-16)

And read:It's time for stock-market investors to refocus on the Fed (http://www.marketwatch.com/story/now-its-time-for-the-stock-market-to-refocus-on-the-fed-2018-03-16)

Stock movers

John Wood Group PLC shares (WG.LN) fell 4.9% as the energy services company swung to a 2017 pretax loss of $21.6 million (http://www.marketwatch.com/story/john-wood-group-swings-to-pretax-loss-2018-03-20) after completing its buyout of engineering company Amec Foster Wheeler.

Deutsche Boerse AG shares (DB1.XE) gained 2.5% after HSBC raised its price target on the exchange operator to EUR123 a share from EUR114 a share.

A.P. Moeller-Maersk A/S shares (MAERSK-B.KO) declined 1.8% after the Danish shipping company said Chief Finance, Strategy and Transformation Officer Jakob Stausholm will leave the company (http://www.marketwatch.com/story/ap-moeller-maersk-finance-chief-to-leave-company-2018-03-20-64852852) as of March 31. Maersk didn't disclose the reason for his planned departure.

Bellway PLC (BWY.LN) gained 3.3% as the U.K. home builder said it's on track to deliver record sales (http://www.marketwatch.com/story/bellway-profit-rises-on-track-for-record-sales-2018-03-20) for the full year and that pretax profit rose 17% for the first half of fiscal 2018.

BHP Billiton PLC (BLT.LN) (BHP.AU)(BHP.AU) picked up 1.5%, with shares of the mining heavyweight upgraded to neutral from underperform at Exane BNP Paribas, according to Dow Jones Newswires.

Micro Focus shares (MCRO.LN) rose 2.5% after plunging 46% on Monday following the software maker's announcement that CEO Chris Hsu has resigned (http://www.marketwatch.com/story/micro-focus-shares-slump-on-ceo-exit-revenue-warning-2018-03-19) and warned that revenue for fiscal 2018 will fall more than previously anticipated.

(END) Dow Jones Newswires

March 20, 2018 09:35 ET (13:35 GMT)

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