By Peter Nurse

- European stock markets edged lower Tuesday in cautious trading ahead of the release of key U.S. inflation data as well as rising geopolitical tensions.

By 03:40 AM ET (0740 GMT), the DAX in Germany traded 0.3% lower, the CAC 40 in France fell 0.1%, and U.K.’s FTSE 100 traded largely unchanged.

Stock indices in Europe have pushed higher in recent sessions, helped by generally positive corporate earnings as well as the hope that the Federal Reserve will shortly get less aggressive with its interest rate increases in the wake of the U.S. economy, the world’s largest, entering a technical recession.

A drop in inflation could be a sign the economy is cooling enough for the Fed to ease its current tightening pace, and Wednesday’s U.S. CPI is expected to come in at 8.7% for July, down slightly from the 9.1% seen in the prior month.

Also prompting caution Tuesday are rising geopolitical tensions, with the conflict between Russia and Ukraine resulting in the shelling of Europe’s largest nuclear power station.

Additionally, Taiwan's foreign minister said earlier Tuesday that China was using the military drills it launched in protest against U.S. House Speaker Nancy Pelosi's visit as an excuse to prepare for an invasion of the island.

Such a move would have a weighty impact on relations between the globe’s two economic superpowers.

In corporate news, Munich Re (ETR:MUVGn) stock fell 0.4% after the reinsurer took a hit of almost $1 billion to its investment portfolio in a volatile second quarter for financial markets.

InterContinental Hotels (LON:IHG) stock fell 1.3% despite the Holiday Inn owner announcing a share buyback programme of $500 million and resuming interim dividend after its half-year profit more than doubled on the back of a steady recovery in post-pandemic travel.

Dufry (SIX:DUFN) stock rose 3.4% after the Swiss duty-free retailer said it saw strong sales momentum continue in July despite the soaring inflation, with its turnover more than doubling in the first six months of the year.

Oil prices fell Tuesday as investors digested the resumption of talks to revive the 2015 Iran nuclear accord, which could potentially result in the Persian country’s crude exports returning to the global market.

European Union diplomats presented the US and Iran late Monday with a final draft accord to revive the 2015 deal, with a senior EU official stating that a final decision was expected within "very, very few weeks".

Such a deal could result in Iran boosting its oil exports by around 1 million barrels per day, but agreement has proved difficult to reach in the past.

Weekly U.S. oil inventory data from the American Petroleum Institute is due later Tuesday, ahead of the official data from the Energy Information Administration on Wednesday.

By 03:40 AM ET, U.S. crude futures traded 0.8% lower at $90.00 a barrel, while the Brent contract fell 0.7% to $95.93.

Additionally, gold futures fell 0.3% to $1,800.75/oz, while EUR/USD traded 0.1% higher at 1.0205.