Spain's IBEX 35 stock index opened higher on Tuesday, awaiting the release of US producer price data, which could advance the tone of Wednesday's headline inflation report and help forecast the extent and timing of the Federal Reserve's rate cuts.

The US CPI data will be key in deciding how far the Fed will cut interest rates.

For now, markets are evenly split between a 25 or 50 basis point cut at the upcoming September meeting, according to CME's FedWatch tool, with traders expecting 100 basis point cuts this year.

The appearance of Atlanta Fed President Raphael Bostic at 1715 GMT could also be a supportive factor, Bankinter analysts noted on their Telegram channel.

"(Bostic) is likely to insist that the Fed will act when necessary, but without haste because the U.S. economy remains in good shape."

In addition, investors will also have an eye on Germany's August ZEW confidence index for August (0900 GMT).

Before markets opened, Spain's National Statistics Institute said the country's 12-month inflation, harmonized with the EU, fell to 2.9% in July from 3.6% in the year to June.

At 0707 GMT on Tuesday, Spain's IBEX 35 was up 44.00 points, or 0.41%, to 10,690.20 points, while the FTSE Eurofirst 300 index of large European stocks was up 0.41%.

In the banking sector, Santander rose 0.48%, BBVA gained 0.40%, Caixabank advanced 1.59%, Sabadell gained 0.73%, Bankinter gained 0.38%, and Unicaja Banco rose 0.17%.

Among the large non-financial stocks, Telefónica fell 0.12%, Inditex advanced 0.18%, Iberdrola gained 0.50%, Cellnex gained 0.47%, and the oil company Repsol rose 0.24%.

(Information by Javi West Larrañaga; edited by Benjamín Mejías Valencia)