Shares slip as investors look to earnings, tariff talks

European shares fell on Tuesday, deflated by mixed corporate earnings, while investors took stock of tariff negotiations between the U.S. and its trading partners. The Euro STOXX 600 index fell 0.4%, with bourses in Germany and France losing 0.7% and 0.5% respectively.

Chemical stocks declined 1.2%, with Dulux paint maker Akzo Nobel losing 1.9% after lowering its core profit outlook for 2025. Earnings from firms including SAP and UniCredit were also in focus.

Investors were also following tariff talks ahead of Washington's August 1 deadline, with the European Union exploring a broader set of possible countermeasures against the U.S. as hopes for an acceptable agreement fade.

The euro was steady at $1.1689, after rising 0.5% on Monday, but was still away from the near four-year high it touched at the start of the month. The single currency is up 13% this year as investors look for alternatives to U.S. assets bruised by tariff uncertainties.

"The euro's ability to maintain preference over the dollar amid tariff tensions will depend on the extent of any escalation and whether the EU emerges as a relative loser while other countries secure significant deals with the U.S.," ING analysts wrote in a note to clients.

Wall Street futures were flat. The S&P 500 and the Nasdaq closed at record highs on Monday.

Investors are awaiting results this week from Wall Street giants Alphabet and Tesla, as well as from European heavyweights LVMH, and Roche, as uncertainty over tariffs clouds the outlook. Earlier, Asian share markets drifted lower after scaling a near four-year peak.

MSCI's broadest index of Asia-Pacific shares outside Japan hit its highest level since October 2021 in early Asian hours but was last down 0.5%. The index is up nearly 16% this year.

Japanese markets returned after a holiday on Monday following the weekend's election where the ruling coalition suffered a defeat in upper house elections, although Prime Minister Shigeru Ishiba vowed to remain in his post. The yen rallied 1% on Monday, recouping some of the losses from past weeks and was last down 0.3% at 147.73 per dollar.

FED INDEPENDENCE

The dollar index, a measure against six other key currencies, was at 97.942. The rumblings around the Federal Reserve's independence and whether U.S. President Donald Trump will fire Fed Chair Jerome Powell have kept investors on tenterhooks in recent weeks.

Trump appeared near the point of trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow.

U.S. Treasury Secretary Scott Bessent said on Monday the entire Federal Reserve needed to be examined as an institution and whether it had been successful, exacerbating concerns about the independence of the U.S. central bank.

The Fed is widely expected to hold rates steady in its July meeting but might lower rates later in the year. Market focus will be squarely on Powell's speech later on Tuesday for clues about when the Fed might ease policy.

In commodities, Brent crude futures fell 0.7% to $68.72 a barrel, while U.S. West Texas Intermediate crude slipped 0.8% to $66.68 per barrel.