European stocks turn negative as earnings, Fed decision hold spotlight; Novartis falls 4%

LONDON — European stocks were lower on Tuesday as global markets await the U.S. Federal Reserve’s interest rate decision.

The pan-European

Elsewhere, the Financial Times reported on Tuesday that the U.K.’s Office for Budget Responsibility (OBR) is expected to cut its productivity growth forecast by more than expected – which could add an additional £20 billion ($26.6 billion) to the hole in the country’s public finances. Finance Minister Rachel Reeves is already scrambling to fix a fiscal hole that could be as big as £50 billion when she delivers her critical Autumn Budget next month.

The British pound fell on Tuesday. By 1:25 p.m. in London, sterling was around 0.5% lower against both the greenback and the euro. Yields on U.K. government bonds – known as gilts – edged lower across the curve, with the 30-year gilt yields shedding 1 basis point.

The U.K. has the highest long-term government borrowing costs of any G7 nation, with the yield on the 30-year gilt hovering well above the 5% threshold.

The big event for investors this week is the Fed’s two-day meeting, which begins on Tuesday. The market is now pricing in a 96% chance that the U.S. central bank will announce a 25 basis-point rate cut this week, according to the CME Fedwatch tool.

Traders are also hoping for a signal from Fed Chair Jerome Powell on Wednesday that the central bank will cut once more at its final meeting of the year in December, given concerns about a weakening labor market.

The Fed is dealing with an economic data blackout given the ongoing U.S. government shutdown, with last week’s inflation report one of the few data pieces to be released recently.

— CNBC’s Pia Singh and Hugh Leask contributed to this market report.