AFP/London

Europe’s main stock markets mostly treaded water yesterday as traders digested better-than-expected German investor sentiment data and an all-important US Federal Reserve policy meeting got underway.

London’s FTSE 100 index of leading shares climbed 0.69% to end at 6,374.21 points while in Frankfurt the DAX 30 index added 0.17% to close at 8,229.51 points.

However in Paris the CAC 40 dipped 0.08% to finish at 3,860.55 points.

Milan was flat and Madrid rose 0.54%.

“The markets have the Fed meeting in their sights and nothing else seems to have the power to move them,” said analyst Andrea Tueni at Saxo Bank.

The Fed is expected to announce today after a two-day meeting when or if it intends to begin reeling in the huge bond-buying scheme as the economy shows signs of picking up.

Financial markets have been unsettled in recent weeks as investors speculate on whether the Fed will soon begin to taper its $85bn-a-month quantitative easing programme, which helped to fuel a global stocks rally.

A mixed bag of US data recently has pointed to an uncertain recovery with many analysts predicting the Fed would hold off cutting back on the purchases for the time being.

Yesterday, data showed housing starts rose by a less than expected 6.8% in May, while consumer prices rose a modest 0.1%, which Wall Street apparently took to indicate the Fed would continue stimulus at its current rate.

In midday trading yesterday, with the Dow Jones Industrial Average rose 0.81% to 15,302.80 points, while the broad-based S&P 500 added 0.67% to 1,650.08 points, and the tech-rich Nasdaq Composite Index increased 0.84% to 3,481.11 points.

An improvement in German investor sentiment also helped European markets.

“European markets have continued to find support... with a small beat on the German ZEW survey propping up stocks,” said Matt Basi, head of UK sales trading at CMC Markets.

German investor sentiment rose slightly in June, on firming hopes for a gradual recovery in Europe’s biggest economy in the second half of the year, the ZEW economic institute said. Its closely watched index rose 2.1 points from May to 38.5. This was better than expected by analysts questioned by Dow Jones Newswires, who had forecast an index of 38.1.

“The financial market experts are sticking to their assessment: The German economy is likely to gain momentum in the second half of 2013,” said ZEW president Clemens Fuest in a statement.

“The survey results indicate, however, that the economic recovery will proceed timidly. Almost half of respondents expect no significant economic impetus in the next half-year.”

In foreign exchange deals, the European single currency rose to $1.3401 from $1.3367 late in New York on Monday.

The dollar increased to ¥95.29 from ¥94.46 on Monday.

On the London Bullion Market, the price of gold fell to $1,361.08 an ounce from $1,384.75 on Monday.

Investors were tracking closely also the bond markets amid worries over rising yields.

Spain’s short-term borrowing costs climbed sharply as the Treasury raised €5.038bn ($6.7bn) in an auction of six- and 12-month bills, reflecting renewed investor concern over the ability of the recession-hit country to repay its debts.

The Treasury sold €1.087bn worth of six-month bills with an average yield of 0.821%, up from 0.492% from the last similar auction held on May 14.