German share price index DAX graph is pictured at the stock exchange in Frankfurt
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 7, 2022. Reuters

European shares traded in a tight range on Tuesday as investors focussed on U.S. midterm elections that will determine control of Congress, while Danish jewellery maker Pandora jumped after reporting quarterly sales above expectations.

The STOXX 600 index edged 0.1% lower by 0905 GMT, trading in a range of 416.35 points to 418.44 points in early deals.

Pandora surged 7.8% to top the benchmark index as the company said it had so far not seen shoppers behaving differently despite soaring living costs.

Traders refrained from taking big positions ahead of the U.S. midterm elections later in the day, with analysts expecting a Republican victory which would lead to a potential split government.

"The question for many is whether investors will respond positively to the deadlock in Washington," said Craig Erlam, a senior market analyst of UK & EMEA at OANDA.

"On one hand, the prospect of less spending could be viewed as aiding the inflation fight, but on the other, the economy could be headed for recession, and inaction in the government won't help the situation."

Investors will also keep a close eye on U.S. consumer prices data for October to determine whether the Federal Reserve's aggressive tightening policy has helped bring down decades-high inflation.

Better-than-expected corporate earnings and hopes that the Fed will deliver rate hikes in smaller increments have helped the STOXX 600 kick off November on solid ground.

Two European Central Bank policymakers said the central bank would continue to raise borrowing costs even as the euro zone economy suffered because letting inflation stay high would be even more painful.

The European basic resources index shed 1.1%, tracking falls in base metals prices amid fading hopes that China would ease its strict zero-COVID policy anytime soon. [MET/L]

Oil prices also declined, dragging down European energy stocks by 1.1%.

Luxury giants, including LVMH and Hermes International, which have a major exposure to China, fell 1.0% and 0.8%, respectively.

UK's Persimmon sank 8.1% to the bottom of London's FTSE 100 as Britain's second-largest housebuilder warned on 2023 profit margins after house prices weakened and its sales rate slipped.