The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 8, 2025. REUTERS/staff

By Purvi Agarwal and Ragini Mathur

Dec 9 (Reuters) - European shares ended flat on Tuesday as investors stayed cautious going into the U.S. Federal Reserve's two-day policy meeting, while EssilorLuxottica slumped after Google unveiled plans to launch AI-powered glasses.

The pan-European STOXX 600 closed little changed at 578.11. Regional benchmarks were mixed, with Germany's DAX up 0.5% and France's CAC-40 down 0.7%.

Ray-Ban maker EssilorLuxottica dropped 5.6% - on track for its worst day since April 3 - after Google said it would launch artificial intelligence-enabled glasses in 2026 with Warby Parker.

The news weighed on other luxury stocks, including Kering and LVMH, which fell 2% and 1.4%, respectively. The broader luxury index led sectoral losses with a 1.8% decline.

Insurers were the biggest gainers, up 1.3%, while banks advanced 0.8%.

Defence stocks climbed after Bloomberg News reported that German lawmakers are set to approve procurement contracts worth a record 52 billion euros ($60.5 billion) next week. Rheinmetall, RENK and Hensoldt gained between 3.6% and 5.9%, lifting the sector index 0.9%.

Markets remained focused on the Fed's two-day policy meeting, which begins on Tuesday. The central bank is widely expected to cut rates by 25 basis points on Wednesday, but attention will centre on policymakers’ guidance for the path beyond December.

"It's the biggest risk event of the week. It's more about the detail... with regard to the dot plots, any changes to the projections, how many dissents," said Daniela Hathorn, senior market analyst at Capital.com.

"With such a key event a day from now, it's common that you see kind of this indecision creeping in and more of a wait-and-see approach."

Expectations for U.S. rate cuts, after delayed economic data and dovish comments from some policymakers, have lifted global equity markets in recent weeks.

But in Europe, investors have begun to price out a rate cut in the coming years after European Central Bank policymaker Isabel Schnabel said on Monday that the ECB's next move could be a hike, signalling a potential divergence between the two central banks.

The hawkish comments sent 10-year euro zone borrowing costs to multi-month highs and German 30-year yields to over 14-year highs on Monday.

Among other stocks, Thyssenkrupp dropped 6.4% after the German conglomerate forecast a net loss of up to 800 million euros ($931 million) in 2026.

Galp sank 14.6% - the day's worst performer - after the Portuguese energy firm signed a deal handing TotalEnergies operatorship of the major Mopane discovery offshore Namibia.

Renewable energy companies Nordex and SMA Solar rose 2.1% and 3.1%, respectively, after a federal judge rejected U.S. President Donald Trump's ban on new wind energy projects.

($1 = 0.8593 euros)

(Reporting by Purvi Agarwal and Ragini Mathur in Bengaluru. Editing by Harikrishnan Nair and Mark Potter)