(fxcue news) - European stocks may open on a sluggish note Tuesday as investors fret about China's economic recovery and wait for policy hints from the Trump administration. The downside, however, may remain limited after U.S. stocks rose for a fifth session overnight. U.S. stock futures declined, and Asian markets were broadly lower as investors weighed the potential impact of U.S. tariffs on China. Hong Kong's Hang Seng index was down more than 2 percent despite reports that Chinese authorities were planning to cut taxes for home purchases to help revive a moribund housing market. The dollar index ticked higher for a third day as investors await key U.S. inflation readings, reports on retail sales and industrial production, and FOMC member commentary for additional clues to the Fed's rate trajectory. Closer home, German economic sentiment and inflation figures along with unemployment data from the U.K. may garner investor attention later in the day. Gold was little changed after falling more than 2 percent on Monday, weighed down by the dollar's continued rise. Oil held the biggest drop in two weeks on China demand concerns. U.S. stocks extended last week's rally overnight amid optimism on proposed tax cuts and deregulation during Trump's second term. The Dow and the S&P 500 rose 0.7 percent and 0.1 percent, respectively to reach new record highs while the tech-heavy Nasdaq Composite ended little changed. European stocks closed on a firm note Monday ahead of a busy week of top-tier economic data. The pan European STOXX 600 climbed 1.1 percent, logging its biggest single-day gain in six weeks as defense stocks surged on expectations of increased military spending in the U.S. and other countries under a Trump U.S. presidency. The German DAX and France's CAC 40 both rallied around 1.2 percent while the U.K.'s FTSE 100 gained 0.7 percent.