By Peter Nurse

Investing.com - European stock markets traded lower Tuesday, amid caution ahead of the latest European consumer inflation data leading into a key meeting of the European Central Bank later in the week.

By 03:55 AM ET (0755 GMT), the DAX in Germany traded 0.9% lower, the CAC 40 in France fell 1%, and the U.K.’s FTSE 100 was down 0.4%.

The relief rally seen in European stock markets over the previous two sessions has lost some momentum Tuesday, with investors turning wary ahead of Thursday’s ECB meeting.

The central bank is widely expected to deliver its first interest-rate hike since 2011 later this week, with policymakers having basically committed to a quarter-point hike at the last meeting in June. That said, Reuters reported earlier Tuesday that the ECB will also discuss a 50 basis point hike on Thursday.

Investors are also focusing on what September will bring, especially as the growth outlook has deteriorated in recent weeks on growing fears about gas supplies to Europe.

The final reading of the June Eurozone CPI is due later in the session, and is expected to confirm inflation running at a record high of 8.6% on the year, up 0.8% on the month.

Ahead of that, U.K. labor data showed the country's unemployment rate remained unchanged at 3.8% in May, while the number of people claiming jobless benefits fell by 20,000 in June, less than expected. Average earnings growth slowed and fell further behind inflation in May, the Office for National Statistics said on Tuesday.

Investors are also still waiting cautiously to see whether Russia resumes the flow of gas through the Nord Stream 1 pipeline on July 21, while Italian political uncertainty continues with Prime Minister Mario Draghi set to address lawmakers on July 20, when he’ll declare his intention to either give his fractious coalition another try or quit the government.

In corporate news, EDF (EPA:EDF) stock soared over 15% after France's government offered €9.7 billion ($9.85 billion) to take full control of the power company that would give it a free hand to run the group as it contends with a European energy crisis.

Finnair (HE:FIA1S) stock fell 7.8% after Finland's national carrier posted a quarterly loss on Tuesday and said the Ukraine war and the lingering impact of the pandemic were set to keep the company in the red for a third straight year this year.

Volvo (ST:VOLVb) stock fell 1.6% after the Swedish truck maker warned of continued supply chain issues, even as it posted a bigger-than-expected rise in profit helped by strong demand for its trucks.