STOXX 600 hits one-week low as banks, insurers slide ahead of Fed decision

European shares fell more than 1% at close on Tuesday, weighed down by rate-sensitive sectors, as investors turned cautious in the run-up to the U.S. Federal Reserve's highly anticipated monetary policy verdict on Wednesday.

The pan-European STOXX 600 index  closed down 1.15% to 550.73 - a one-week low - with financials , banks  and insurance  carrying losses between 2% and 2.1%.

Germany's DAX, France's CAC 40  and Britain's FTSE 100  also incurred steep losses.

The Fed's two-day policy meeting is widely expected to conclude in a 25-basis-point interest rate cut on Wednesday, potentially the first dovish policy verdict this year following signs of a weaker U.S. job market. Some traders even see a potential 50-bps cut.

"If the Fed did (cut by) 50 bps, you could interpret that things were worse than we thought they were, that the jobs market was slowing down or there was something happening with economic figures that we weren't seeing," said Rebecca Chesworth, a senior equities strategist at State Street Investment Management.