European Markets React to Germany's Spending Surge and Anticipated Fed Decision

European shares dropped after initial gains spurred by Germany's approval of increased spending. The focus now shifts to the U.S. Federal Reserve's rate decision. The STOXX 600 index declined 0.3%, with banks and basic resources leading losses. Meanwhile, Traton shares fell significantly after a stake sale by Volkswagen.

European stocks experienced a decline on Wednesday following a day of strong gains triggered by Germany's approval of a significant spending package. All eyes are now on the U.S. Federal Reserve's upcoming interest rate decision.

The STOXX 600 index saw a 0.3% dip by 0813 GMT, with Germany's blue-chip index losing 0.5%. The prior day's gains were attributed to the German parliament's endorsement of increased economic and military expenditures, which had boosted German equities.

On the other hand, the European aerospace and defense index rose 0.7% to achieve a new high, benefiting from anticipated defense spending. Barclays elevated its year-end prediction for the STOXX 600 amid promising long-term growth due to fiscal reforms. Additionally, Volkswagen's sale of a stake in Traton caused the truckmaker's shares to plummet by 6.3%.

(With inputs from agencies.)