UPDATE 2-European stocks edge lower, Lufthansa drags after profit warning

* Lufthansa plunges after profit warning, weighs on airlines
* Investors await upcoming FOMC meeting on Wed
* Deutsche Bank gains on report it plans to set up a "bad
bank"

(Updates to close)
By Susan Mathew and Medha Singh
June 17 (Reuters) - European stock markets closed marginally
lower on Monday with a profit warning from Germany's Lufthansa
hitting airline stocks, while markets globally awaited clues
from the U.S. Federal Reserve on its policy direction.
The pan-European STOXX 600 index .STOXX finished 0.1%
lower. France's CAC 40 .FCHI was led higher by luxury stocks,
while IT company Indra Sistemas' IDR.MC 7.1% slip took Spain's
IBEX 35 .IBEX 0.7% lower.
At the U.S. Federal Reserve policy meeting starting Tuesday,
investors on balance think an interest rate cut is unlikely
while many back a shift towards one in July. A swing in money market pricing towards up-to-three rate
cuts by the Fed this year have been at the heart of a recovery
for stock markets this month after their worst falls in months
in May. MKTS/GLOB
"The market seemed to be in a kind of cautious mode because
of the Fed meeting. A lot has been priced in," said Craig Erlam,
senior market analyst at Oanda.
"There is a much higher chance that the Fed intentionally or
unintentionally pours cold water over the expectations," he
said.
The European travel and leisure sector .SXTP
underperformed other major European sectors as Lufthansa
LHAG.DE plunged 11.6% and kept Germany's DAX pressured.
.GDAXI
The group lowered its profit outlook for the full year 2019,
citing price competition from low cost rivals in Europe.
"Lufthansa signaling a weak outlook is hitting all these
bigger carriers and that's definitely one negative element this
morning," said Chris Beauchamp, chief market analyst at IG.
International Consolidated Airlines (IAG) ICAG.L fell
2.2%, while budget airlines EasyJet EZJ.L and Ryanair Holdings
RYA.I slipped more than 4% each.
Spain's Indra Sistemas fell after a media report said is to
buy up to 75% of ITP Aero from Rolls Royce RR.L for about 1
billion euros ($1.12 billion). Contributing to CAC 40's gains, French luxury stocks Kering
PRTP.PA and LVMH LVMH.PA rose more than 1%. Peer Chanel
reported higher annual sales and profits on Monday. Banks had a mixed day.
HSBC HSBA.L rose 0.9% and was among the biggest boosts to
STOXX 600 after it announced plans to expand its branch network
by around a quarter as it opened a new location in Apple Inc's
home town of Cupertino, California. Deutsche Bank DBKGn.DE , which has been cutting back and
reorganising for months, gained 1.4% after the Financial Times
reported that the German lender is planning to create a "bad
bank" that would house or sell assets valued at up to 50 billion
euros. Meanwhile, Nordea Bank NDAFI.HE , the Nordic region's
biggest lender, slipped 1.7%. Its Danish headquarters was
searched on June 12 by Denmark's state prosecutor in relation to
an ongoing money-laundering investigation into the bank, a
Nordea spokesman told Reuters.