European stocks gain ahead of German court, US Fed

European shares mostly rose on Tuesday, with attention focused on the Federal Reserve's upcoming meeting, but the fashion sector reeled after a profits warning from British firm Burberry. Traders also looked towards Germany, where a court was on Wednesday due to rule on the constitutionality of Berlin taking part in the European Stability Mechanism (ESM) rescue fund to support debt-plagued eurozone countries. London's FTSE 100 index of top companies closed just 0.02 percent lower at 5,792.19 points but Frankfurt's DAX 30 rallied 1.34 percent to 7,310.11 points and in Paris the CAC 40 gained 0.89 percent to 3,537.30 points. Madrid stocks rose 0.93 percent amid lingering speculation over a possible Spanish bailout, while Milan gained 0.84 percent in value. "We are in a wait-and-see market," said Alexandre Baradez of Saxo Bank. "The (Paris) index hovered around equilibrium all day before gaining speed in the late trading. Investors hope for a positive verdict from the German judges and measures from the US Federal Reserve," Baradez said. The euro rallied to $1.2871, the highest point since May 14, up from $1.2758 on Monday. The unit has won strong support since the European Central Bank pledged last week to buy sovereign bonds of indebted eurozone nations, with speculation about further US monetary easing keeping downward pressure on the dollar. 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. US stocks advanced in midday trade on expectations of new support from the Fed for the tepid economy. The Dow Jones Industrial Average rose 0.63percent, the S&P 500-stock index added 0.48 percent, while the tech-rich Nasdaq gained 0.30 percent. "Stocks looked to rebound from yesterday's losses as Thursday's policy decision by the Fed brought in hopes for an announcement of additional stimulus measures to help promote growth and lower unemployment," analysts at Wells Fargo Advisors said. On the company earnings front, shares in luxury clothing and accessories group Burberry tumbled by more than 20 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 22.11 percent to 1,088 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 3.36 percent and 2.07 percent, to stand at 127.80 euros and 125.25 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.