European stocks flat ahead of Fed meeting

European shares were mostly little changed on Tuesday, with the fashion sector reeling after a profits warning from British firm Burberry and with attention also focused on the Federal Reserve's upcoming meeting. Traders also looked towards Germany, where a court was on Wednesday due to rule on the constitutional legality of Berlin taking part in the European Stability Mechanism (ESM) rescue fund to support debt-plagued eurozone countries. London's benchmark FTSE 100 index of top companies fell 0.30 percent to stand at 5,7775.60 points in early afternoon trade. The Paris CAC 40 eased 0.37 percent to 3,493.10 points but Frankfurt's DAX 30 edged up 0.08 percent to 7,219.72. Madrid stocks recoiled by 0.72 percent amid lingering speculation over a possible Spanish bailout, while Milan lost 0.84 percent in value. The euro rallied to $1.2819, the highest point since May 22, before pulling back to $1.2805. The unit has won strong support since the European Central Bank pledged last week to buy sovereign bonds of indebted eurozone nations. Asian markets mostly retreated Tuesday after losses on Wall Street as dealers waited to see if the Fed would this week announce a fresh round of stimulus. "The FTSE is off to a shaky start after overnight losses in Asia and the US as investors look to take some money off the table in the run up to key decisions regarding the eurozone and tomorrow's Federal Reserve meeting," said Spreadex trader Matthew Nelson. "Germany's constitutional court will tomorrow decide on the powers of the eurozone's ESM bailout fund. He added: "Following Friday's disappointing jobs data the consensus is that we will see some form of monetary easing (from the Fed) this week to underpin what is a fragile US recovery." On the company earnings front, shares in luxury clothing and accessories group Burberry tumbled by more than 18 percent after the firm issued a surprise profits warning which hit the wider fashion sector. Burberry said in a trading update that like-for-like sales, stripping out the impact of new floor space, ground to a halt in the 10 weeks to September 8 and have started to fall.As a result, Burberry warned that annual profits would be at the bottom end of analysts' expectations of between £405 million and £445 million. In reaction, the group's share price plunged by 18.48 percent to 1,120 pence. Analysts warned that the news could signal that the high-end luxury goods industry was no longer immune to weakness in the global economy. In Paris, shares in luxury fashion groups LVMH and PPR slid by 4.27 percent and 3.87 percent, to stand at 126.6 euros and 122.95 euros respectively. "A worrying piece of corporate news this morning has come in the form of Burberry's profit warning," said Simon Denham, head of trading firm Capital Spreads. "The retailer has enjoyed a few boom years as a result of the ever growing middle class in the Far East, in particular China. "Does this set of results signal a flagging of the Chinese consumer -- and if it does, the ramifications for the rest of us could be greater than many think," he added. In Asia, the Tokyo stock market ended down 0.70 percent, Sydney dropped 0.18 percent and Seoul lost 0.24 percent. Shanghai shed 0.67 percent but Hong Kong staged a late rally to close 0.15-percent higher. Dealers were waiting to see if Fed chief Ben Bernanke would unveil a third round of bond-buying, or quantitative easing, to kickstart the US economy, which has seen a stuttering recovery from the global downturn.