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Euro STOXX falls 0.4%

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Earnings season, tariffs in focus

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Japan's Nikkei rises in relief rally after priced-in

election

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US dollar subdued as investors await tariff clarity

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Fed independence remains a worry for investors

(Updates prices following start of European trading sessions)

By Tom Wilson and Ankur Banerjee

LONDON/SINGAPORE, July 22 (Reuters) - European shares

fell on Tuesday, deflated by mixed corporate earnings, while

investors took stock of tariff negotiations between the U.S. and

its trading partners.

The Euro STOXX 600 index fell 0.4%, with bourses in

Germany and France losing 0.7% and 0.5%

respectively.

Chemical stocks declined 1.2%, with Dulux paint

maker Akzo Nobel losing 1.9% after lowering its core

profit outlook for 2025. Earnings from firms including SAP

and UniCredit were also in focus.

Investors were also following tariff talks ahead of

Washington's August 1 deadline, with the European Union

exploring a broader set of possible countermeasures against the

U.S. as hopes for an acceptable agreement fade.

The euro was steady at $1.1689, after rising 0.5%

on Monday, but was still away from the near four-year high it

touched at the start of the month. The single currency is up 13%

this year as investors look for alternatives to U.S. assets

bruised by tariff uncertainties.

"The euro's ability to maintain preference over the dollar

amid tariff tensions will depend on the extent of any escalation

and whether the EU emerges as a relative loser while other

countries secure significant deals with the U.S.," ING analysts

wrote in a note to clients.

Wall Street futures were flat. The S&P 500

and the Nasdaq closed at record highs on Monday.

Investors are awaiting results this week from Wall Street

giants Alphabet and Tesla, as well as from

European heavyweights LVMH, and Roche, as

uncertainty over tariffs clouds the outlook.

Earlier, Asian share markets drifted lower after scaling a

near four-year peak.

MSCI's broadest index of Asia-Pacific shares outside Japan

hit its highest level since October 2021 in

early Asian hours but was last down 0.5%. The index is up nearly

16% this year.

Japanese markets returned after a holiday on Monday

following the weekend's election where the ruling coalition

suffered a defeat in upper house elections, although Prime

Minister Shigeru Ishiba vowed to remain in his post.

The yen rallied 1% on Monday, recouping some of

the losses from past weeks and was last down 0.3% at 147.73 per

dollar.

FED INDEPENDENCE

The dollar index, a measure against six other key

currencies, was at 97.942.

The rumblings around the Federal Reserve's independence and

whether U.S. President Donald Trump will fire Fed Chair Jerome

Powell have kept investors on tenterhooks in recent weeks.

Trump appeared near the point of trying to fire Powell last

week, but backed off with a nod to the market disruption that

would likely follow.

U.S. Treasury Secretary Scott Bessent said on Monday the

entire Federal Reserve needed to be examined as an institution

and whether it had been successful, exacerbating concerns about

the independence of the U.S. central bank.

The Fed is widely expected to hold rates steady in its July

meeting but might lower rates later in the year. Market focus

will be squarely on Powell's speech later on Tuesday for clues

about when the Fed might ease policy.

In commodities, Brent crude futures fell 0.7% to

$68.72 a barrel, while U.S. West Texas Intermediate crude

slipped 0.8% to $66.68 per barrel.