European stocks are likely to fall modestly at the start of trading Tuesday as investors eye movements in the U.S. dollar ahead of a key speech in London from Federal Reserve Chairwoman Janet Yellen.

Britain's FTSE 100 is poised to give back about 0.05% at the opening bell, according to financial bookmakers IG, with similar percentage declines anticipated for the DAX performance index in Germany and France's CAC-40.

Switzerland's SMI is priced to extend yesterday's gain by around 0.3%, supported by defensive stocks and further potential gains for benchmark heavyweight Nestle SA, which rose to a record Monday after hedge fund Third Point revealed a stake in the world's biggest food company and pressed management for strategic and capital structure changes.

The dollar traded marginally higher overnight in Asia, changing hands on an index basis at 97.34 despite a rally in U.S. Treasuries during Monday trading as investors adjust to slowing inflation and a pause in the pace of growth in the world's biggest economy.

The Treasury rally pushed the yield gap between 5-year notes and 30-year bonds narrowed to 94.6 basis points, the least since November 2007, suggesting the market is expecting continued interest rate hikes but less-than-expected longer-term growth.

The adjustment sets up an interesting backdrop for Yellen's address at the London Royal Academy, with some investors betting she may signal only one more rate hike between now and the end of the year as Fed officials wait for inflation to stabilise over its 2% target before offering further policy tightening.

There is little likelihood of inflation support from crude markets, even with prices rising for a fourth consecutive session in overnight trading, given that consistent U.S. supply increases have offset OPEC's agreed production cuts for most of the first half of this year.

West Texas Intermediate crude futures for August delivery faded into the start of the European session and were essentially unchanged from Monday's close at $43.39 per barrel while Brent contracts for the same month, the global benchmark, were seen 5 cents higher at $45.88 per barrel.

Early indications from U.S. equity futures point to a pullback on Wall Street, with the Dow Jones Industrial Average set to slide by a modest 1 point with similar slippages priced for the broader S&P 500 and the Nasdaq.