Europe close: Investors hold fire ahead of US Fed
Boosting investor sentiment, Zara owner Inditex reported a return to profits and an acquisition by chemicals and food ingredients firm IMCD.
The pan-European STOXX 600 index was up 0.58% with all major bourses in the green apart from London's FTSE 100.
Investors on the Continent chose to hold fire ahead of the US Federal Reserve's policy announcement later in the session.
Yet the FTSE 100 was down 0.44% at 6,078.48, while the pound was up 0.54% against the US dollar at 1.2958. Figures released earlier by the Office for National Statistics showed that inflation plunged in August as the government's Eat Out to Help Out scheme cut the cost of restaurant bills.
Annual consumer price inflation fell to 0.2% from 1% in July as Finance Minister Rishi Sunak's subsidy for meals out and a VAT cut for the hospitality industry reduced prices. On average, economists had expected the rate of price increases to drop to zero.
In corporate news, Inditex said it saw a 74% jump in first-half online sales. Shares in the company rose by more than 5%, taking the stock to the top of the gainers board.
Shares in Swedish fashion retailer H&M continued their positive run after reporting a stronger-than-expected recovery from the coronavirus lockdown.
IMCD shares jumped more than 7% after the company said it was buying India's Signet Excipients. The Netherlands-based company raised €400m through an accelerated bookbuild at €91 a share to finance the purchase of an initial 70% stake.
German financial services firm Grenke saw its shares slump by more than 20% after the country's industry watchdog BaFin said on Tuesday it was looking into allegations of market manipulation following a critical report by a short-seller.
Grenke strongly rejected allegations made in the report by Fraser Perring of Viceroy Research.
"This report contains allegations which Grenke strongly rejects. A central accusation is that a substantial portion of the €1.078bn in cash and cash equivalents reported in the 2020 half-year financial report does not exist. This is demonstrably false."
UK house builders were also out of favour after Redrow reported a slump in full year profits due to Covid-related impairments on its London operations. Bellway and Taylor Wimpey were lower on the news.