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Investing.com - European stock markets drifted higher Tuesday, continuing the lackluster start to the week as investors consider the outlook for global interest rates.

At 03:05 ET (07:05 GMT), the DAX index in Germany traded 0.3% higher, the CAC 40 in France rose 0.3% and the FTSE 100 in the U.K. climbed 0.2%.

U.S. data in focus

The main European indices traded in tight ranges on Monday, with the U.S. on holiday, and similar cautious activity is likely this week ahead of Friday’s key nonfarm payrolls release.

Investors, and the Federal Reserve, are looking for reassurance that the path is clear to cut interest rates later this month, and to gauge how quickly to cut. 

The previous month's labor report fell short of expectations, prompting a sharp selloff in equity markets on recession fears, and investors are likely to take a cautious stance ahead of this week’s release.

The U.S. ISM manufacturing survey later in the session is the first major indicator out in a big week for U.S. data, and is expected to show that the country’s manufacturing sector remains in contraction territory.

Eurozone manufacturing in doldrums

Back in Europe, inflation fell to the lowest level in three years last week, with the August eurozone CPI coming in at 2.2% on an annual basis.

Additionally, data released on Monday showed that eurozone manufacturing activity remained mired in contraction in August, suggesting a recovery could be some way off and a further loosening of monetary policy could be warranted.

The European Central Bank cut interest rates in June, starting its march lower before the U.S. Federal Reserve, and is expected to reduce interest rates again later this month along with its new inflation and growth projections.

Volvo (OTC:VLVLY) plans long-range electric truck 

In the corporate sector, Volvo (ST:VOLVb) stock rose 0.2% after the Swedish auto firm stated that it plans to launch a long-range variant of its FH Electric truck, capable of covering up to 600 km (373 miles) on a single charge.

The new model, expected to hit the market in the second half of 2025, caters to customers requiring longer hauls by maximizing battery space while improving the truck's software.

Crude close to two-month highs

Crude prices traded in a mixed fashion Tuesday, as traders digested sluggish economic growth in China, the world's biggest crude importer, as well as the halt of production and exports from Libya.

By 03:05 ET, the Brent contract dropped 0.1% to $77.41 per barrel, while U.S. crude futures (WTI) traded 0.1% higher at $74.11 per barrel, after the contract did not settle on Monday because of the U.S. Labor Day holiday.

China's purchasing managers' index hit a six-month low in August, data showed over the weekend, pointing to likely weakening of demand from the world’s biggest crude importer.

Providing support, however, oil exports at major ports in Libya were halted on Monday and production curtailed across the country, amid political turmoil in the OPEC member.

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