European stocks end higher ahead of FOMC meeting

European stock inched higher on Tuesday as investors awaited this week's US Federal Reserve policy meeting, while fears that violence in Iraq could disrupt energy supplies still weighed on sentiment.

London's FTSE 100 index of top companies rose 0.18 percent compared with Monday's closing level to close at 6,766.77 points.

Frankfurt's DAX 30 added 0.37 percent to 9,920.32 points, while the CAC 40 in Paris climbed 0.58 percent to 4,536.07 points.

"Stocks rolled over after the release of higher than anticipated US inflation data but soon recovered with investors looking ahead to the FOMC tomorrow," said analyst Jasper Lawler at CMC Markets UK.

"Markets were holding up relatively well in spite of the shutdown of Iraq's largest oil refinery and weak foreign direct investment in China."

The European single currency drifted down to $1.3545, from $1.3570 late in New York on Monday.

Equities markets have been spooked by concern that a lightning offensive by militants in Iraq could spill over into a regional conflict and the simmering conflict in Ukraine.

Shares in car markers were boosted by news that European sales rose 4.5 percent in May for their ninth consecutive month.

In Paris, Renault added 0.93 to 68.51 euros and in Frankfurt, Daimler rose 0.87 percent to 69.96 euros.

In Copenhagen, shares in Moeller-Maersk closed down 5.34 percent after China on Tuesday blocked an alliance among the world's three largest container operators.

- Focus shifting to Fed -

On Wall Street, shares paused in midday trading after the release of mixed US economic data.

New US home construction and applications for building permits slowed sharply in May, while consumer prices posted the strongest monthly gain in more than a year.

"The combined aspect of the two reports is enough to keep things looking confused," said analyst Patrick O'Hare.

The Dow Jones Industrial Average inched up 0.04 percent to 16,786.90 points.

The broad-based S&P 500 added 0.12 percent 1,940.17 points, while the tech-rich Nasdaq Composite Index added 0.39 percent to 4,337.74.

Investors are now looking ahead to the Federal Open Market Committee (FOMC) decision due on Wednesday.

The "focus will increasingly... shift away from events unfolding in Iraq and the Ukraine to tomorrow's FOMC meeting," said analyst Markus Huber at broker Peregrine & Black.

The Fed is expected to keep its monetary policy on track, but investors are looking for clues on when the central bank will raise benchmark interest rates.

Asian equities ended mixed on Tuesday, with Shanghai hit partly by weak foreign investment figures, dealers said.

Foreign direct investment into China, the world's second-largest economy, fell 6.7 percent year-on-year to $8.6 billion in May, the government said Tuesday.

"Very disappointing foreign investment data out of China is giving reason for concern and might be pointing towards further weakness in the Chinese economy," noted Huber.

- Sterling slips on data -

In foreign exchange activity, the British pound retreated on news of slowing inflation.

"The pound has dropped back as some traders scale back expectations of a 2014 (interest) rate hike," noted IG analyst Chris Beauchamp.

Britain's 12-month inflation rate slowed to 1.5 percent in May, the lowest level for four and a half years, reducing pressure on the Bank of England to raise interest rates from a record low of 0.50 percent.

The latest figures mark the sixth month in a row when the rate has been at or below the Bank of England's 2.0-percent target.

In reaction, the pound dipped to $1.6964, down from $1.6979 on Monday -- when it had briefly hit a five-year high above $1.70 on hopes of an interest rate hike within the next six months.

The euro, meanwhile, slipped to 79.85 British pence from 79.91 pence.