European shares advance ahead of Fed
Major exchanges rise as investors anticipate another rate cut from U.S. central bank. Asia ends mixed.
(CNN) -- Europe's major markets were trading higher Tuesday, looking ahead to an expected interest rate cut by the U.S. Federal Reserve later in the day.
London was up 0.7%, while Paris and Frankfurt surged more than a percent each.
Asian markets were mixed. Tokyo's Nikkei average and the All Ordinaries index in Australia both closed just over a percent lower. In Seoul, the KOSPI gained a third of a percent, while Hong Kong's Hang Seng picked up 0.6%.
Wall Street lost ground on Monday, giving back Friday's modest gains.
The Dow Jones industrial average lost about 65 points, or 0.75%. The Standard & Poor's 500 index fell 1.3%, and the Nasdaq composite slid 2.1%.
A trio of issues are keeping the markets nervous.
Investors waiting on this week's Federal Reserve meeting are trying to figure out what to make of the Bernard Madoff scandal, said Fred Dickson, chief market strategist at D.A. Davidson & Co.
Money manager Madoff was arrested last week on charges that he instigated a $50 billion pyramid scheme that hit companies around the globe.
Investors are also focused on the automakers since the Bush administration said last week that it might offer General Motors (GM, Fortune 500) and Chrysler bridge loans from the $700 billion bailout fund Congress set aside for Wall Street. However, President Bush declined to give a timeline for any action, when speaking over the weekend.
"Investors are expecting a rescue package to be announced, and most of that is baked into the market already," Dickson said.
But he said a bigger problem is what's going to happen to GM's finance arm, GMAC, if it fails to come up with the capital it needs to become a bank holding company. Such a step is necessary for the troubled GMAC to access federal money.
Dickson said that worries about the automakers and GMAC have added an additional element of risk to the markets, making investors more cautious than they might otherwise be right now.
The Fed's policy-setting committee met Monday and will meet again on Tuesday to discuss interest rates, with a decision due at 2:15 p.m. ET. The central bank is widely expected to cut the fed funds rate, a key bank lending rate, by at least a half-percentage point to 0.5%. Some bets are for a bigger cut to 0.25%.
Of greater significance will be what the accompanying statement says about the economy, labor market and credit crisis. A negative outlook could push markets lower.
At least to start the day, Wall Street appears poised to open in positive territory, according to futures trading for the three major U.S. indices. 
