European stocks tread softly ahead of Fed

LONDON, Sept 20 (Reuters) - European stocks continued to trade cautiously in early deals on Wednesday ahead of a policy decision by the U.S. Federal Reserve later in the day, with energy stocks and miners boosted by a rise in metals and oil prices.

The pan-European STOXX 600 was flat in percentage terms, helped by buoyant commodities-related shares, while blue chips were also steady.

European banking stocks were in particular focus, with the sector trading flat as investors awaited the conclusion of the U.S. Federal Reserve's meeting for clues as to whether a third interest rate hike is on the cards for this year.

Banks, which have outperformed the broader market so far this year, are a beneficiary of higher interest rates.

Deal-making was also in focus in Europe, with shares in steelmaker Thyssenkrupp (IOB: 0O1C.IL - news) rising 5 percent after it struck a preliminary deal with India's Tata Steel (BSE: TATASTEEL.BO - news) to merge their European steel operations in a 50-50 joint venture.

Though individual share price moves on the STOXX 600 were otherwise fairly muted, results spurred a 6.5 percent jump in Britain's Kingfisher (Frankfurt: 812861 - news) , the biggest gainer, after the home improvement retailer reported better-than-expected profit for the first half.

Spanish retailer Inditex (Amsterdam: IT6.AS - news) fell 2.6 percent, however, after the Zara-owner saw gross margins eroded in the first half due to a strong euro.

(Reporting by Kit Rees; Editing by Catherine Evans)