By Sruthi Shankar
(Reuters) -European stocks were steady on Tuesday, with defensive sectors in the lead as uncertainty remained on whether Congress will clear a U.S. debt ceiling deal and avert a catastrophic default.
The pan-European STOXX 600 index was flat, though trading activity was expected to pick up momentum as the U.S. and the UK markets reopened after a long weekend.
Sectors that tend to be favoured during times of economic uncertainty such as real estate and utilities led sectoral gains in European morning trade.
A handful of hard-right Republican lawmakers said on Monday they would oppose a deal to raise Washington's $31.4 trillion debt ceiling, in a sign that the bipartisan agreement could face a rocky path through Congress before the U.S. runs out of money next week.
"Details of the deal emerging so far point to spending limits on most items other than military and veterans, meaning the US economy will be facing greater restraints to fiscal policy while the Fed pursues a tight monetary policy," said Mark Haefele, chief investment officer at UBS Global Wealth Management.
"We reiterate our view that the US growth is set to slow as the lagged effect of the Fed tightening feeds through the economy."
The benchmark STOXX 600 is set to log losses for May despite hitting a more than one-year high earlier in the month as concerns about the global economy and the U.S. debt ceiling debacle overshadowed an upbeat earnings season.
The German DAX is set for a fifth consecutive month of gains after the index hit a record high earlier in May, but weakness in the luxury sector put France's blue-chip index on course for sharp monthly losses.
Meanwhile, European Central Bank data showed bank lending to euro zone companies and households slowed again in April, continuing their steady decline since last autumn as the economy stagnated and rapid rate hikes dented demand for credit.
Euro zone consumer confidence and economic sentiment data for May, among others, are due later in the day.
Among single stocks, Nestle slipped 1.5% after the Swiss food group said it had hired Anna Manz, the finance chief at the London Stock Exchange Group (LON:LSEG), as its new chief financial officer.
Unilever (LON:ULVR) Plc dipped 1.4% after the consumer goods giant said Chief Financial Officer Graeme Pitkethly would leave by the end of May 2024.
Shares of Aroundtown recovered 7.7% from record lows hit earlier after the German real estate firm published its first-quarter results.