MILAN (Reuters) - A heavy sell-off on Wall Street sent European shares tumbling on Tuesday with oil stocks leading the decline as crude prices extended their losses and Royal Dutch Shell (AS:RDSa) tumbled on reports of a possible acquisition.
The pan-European STOXX 600 (STOXX) index was down 0.5 percent by 0811 GMT, getting closer to the two-year lows hit last week, with mounting worries over slowing economic growth shifting the focus to possible action by policy makers.
A speech by Chinese President Xi Jinping which investors had hoped could lift morale had no impact, moving the attention to the Federal Reserve which is almost certain to raise interest rates at the end of its two-day meeting on Wednesday.
Traders say a cut to the Fed's rate hike projections could provide support to equities.
"... The big question remains, will (Fed Chairman) Jay Powell remove or include the 'gradual increases' reference to the 2019 dot plots," said OANDA trader Stephen Innes.
The STOXX 600 is down more than 12 percent so far this year and on course for its fourth straight month of declines, dragged down by a slowing economy and political instability in Europe.
On Tuesday almost all sectors were trading in the red, showing how fragile sentiment remained.
Oil stocks fell to their lowest in more than eight months as concerns over future oil demand amid weakening global economic growth sent crude prices down 2 percent.
Shell fell 1.8 percent, also pressured by a Bloomberg report saying the Anglo-Dutch oil major is in talks to buy Endeavor Energy Resources LP for around $8 billion.
BP (L:BP) and Total (PA:TOTF) both fell more than 1 percent, while Norway's Aker BP (OL:AKERBP) declined 5.1 percent to lead losers on the STOXX.
Among the few gainers was Getlink (PA:GETP), up 5 percent after French builder Eiffage (PA:FOUG) bought a 5 percent stake in the company operating the Channel Tunnel between France and Britain.