European markets were down on Tuesday while, in the US, indices were relatively flat. The FTSE 100 saw a 1% drop amid losses from leading companies, with European indices posting mixed results. Investors anxiously look to a speech by Federal Reserve chair Jerome Powell for clues about future interest-rate policy.

European and US markets diverged tuesday, with Europe falling and the US holding on after the U.S. stock market recorded a significant day of gains. Attention is now shifting to a major speech by Federal Reserve Chair Jerome Powell at the end of this week, potentially a market-moving event.

The biggest UK stock index, the FTSE 100, has lost 1% of its value. A significant part of this fall was due to BT Group, a leading UK telecom giant that fell some 6.6%. The plunge in the price of BT stock was significant enough to pull down the whole index. Other oil sector-related companies also saw their stock prices decrease as tensions continued to rise in the Middle East, affecting oil markets worldwide.

In Germany, the DAX was 0.3% down. In France, the CAC 40 was 0.1% lower. These small losses across European markets followed new figures on inflation: the rate of price pressure pushed to 2.6% in the Eurozone during July, from 2.5% during the previous month, coming out above the expectations of economists who foresaw a rise to 2.4%. Core inflation excluding energy and food prices was recorded at 2.9% in July, which is still considerably higher than the 2% target inflation set by the Eurozone, suggesting that economic pressures are likely running relatively hot.

The pan-European STOXX 600 index fell by 0.4% as well. As this is an index that spreads broadly, exposing the generic performance of European stocks, it means that within individual countries there has been a mixed showing. The inflation data coming out of the Eurozone is very important news indeed, as it highlights the way in which prices are rising and will aid the European Central Bank in making decisions.

Across the Atlantic, in the US, the key stock market index, the S&P 500, ended down a fraction. The loss saw an end to an eight-day run of record high closes for the index, its longest such streak since November. The Dow Jones Industrial Average slipped 0.2%, and the tech-heavy Nasdaq Composite dropped by around 0.4%. Of course, recently, the US stock market has really rallied, so there is nothing unusual about the current dip.

Traders and investors across the US are waiting eagerly to get a view on the thoughts of Jerome Powell, head of the Federal Reserve, as he is expected to speak this Friday at the Jackson Hole Economic Symposium. Due to excessively high anticipation about this speech, one may be able to infer important clues regarding future changes in US interest rates. Decisions of the Federal Reserve on interest rates can carry major impacts on the economy and the stock market.

Naeem Aslam, chief investment officer at Zaye Capital Markets, commented that the speech – of huge importance for traders and investors – is being scoured for hints toward a probable rate cut: at this moment, money markets are pricing an 85% chance of a 25-basis points rate cut this September, while speculators, of course, hope for a larger cut of 50 basis points. The reason for such expectations stems from recent data on inflation and the overall economic situation in the US.

Federal Reserve: It regulates inflation and controls economic growth through the rate of interest. If the belief is formed by the Fed that inflation is too high, then it may send a rate of interest hike to cool things down. On the other hand, if fed up with a too-low situation and growth is desired, then it may lower rates. Powell's speech likely offered some insight into the position of the central bank on the way forward.

So, what the market is now creating, or better has developed, is a blend of European economic troubles and US market tranquility. The question is—how central banks will treat the inflation and economy data. Traders and investors are very alert as to what hint is going to influence their decisions in the next months.