Europe markets dip before Fed decision

Visitors sit and read newspapers beyond a reflection of Ibex stock index information inside the Madrid Stock Exchange, or Bolsa y Mercado, in Madrid, Spain. The Ibex 35 index retreated 1% to 8,098.30 points after the release of an IMF report signalling an end to Spain’s double-dip recession but still warning that more reform was needed to reverse high unemployment.

AFP/London

Europe’s main stock markets pulled back in careful trade yesterday, with traders on tenterhooks before the outcome of the US Federal Reserve’s latest monetary policy gathering.

“No one on the market is considering a bold position before the Fed statement,” said Renaud Murail of Barclays Bourse. “It’s the priority and will set the tone for what happens next.”

At close in Europe and just hours before any decision from the US central bank was expected, London’s benchmark FTSE 100 index dropped 0.44% to stand at 6,345.94 points.

Frankfurt’s DAX 30 dipped 0.15% to 8,217.52 points and in Paris the CAC 40 shed 0.32% to 3,848.34 compared with Tuesday’s closing levels.

Madrid’s IBEX 35 index retreated 1.00% to 8,098.30 points after the release of an IMF report signalling an end to Spain’s double-dip recession but still warning that more reform was needed to reverse high unemployment.

Investors have been speculating about when the Fed will start tapering off its $85bn-a-month bond-buying programme, known as quantitative easing, that is credited with helping push global equities to recent highs.

Global equities and currencies have been agitated in recent weeks on expectations that Fed chairman Ben Bernanke will start turning off QE.

Investors are therefore anxious to see what Bernanke would say yesterday at his traditional post-meeting press conference.

In anticipation, Wall Street retreated in nervous trade with the Dow Jones Industrial Average down 0.11% in midday of trade and the tech-rich Nasdaq sliding 0.14% lower.

“Chairman Bernanke’s question-and-answer session is being viewed as a make or break moment for equity market momentum, though whether we will actually garner any clarity on the Fed’s timeframe for tapering their stimulus programme remains to be seen,” said analyst Matt Basi at traders CMC Markets.

The Fed chief roiled markets after last month telling Congress that the US central bank could scale back its QE measures soon, if economic conditions improved.

“Attention is firmly on the Fed’s monetary policy decision and press conference later, with investors clearly concerned that any hints at tapering in the coming months could mark the end of the rally,” said analyst Craig Erlam at traders Alpari. “If Bernanke hints at tapering in the coming months again today, we could see further selling in the weeks and months ahead,” he added.

In company news, in Paris the price of shares in telecom-equipment maker Alcatel-Lucent jumped 6.17% to €1.50 after the company announced a big restructuring programme.

Luxury group Kering, formerly PPR, jumped 2.11% to €162.40 on the eve of the introduction of struggling books and electronics retail unit Fnac on the Paris market.

In Madrid, where the IMF warned that Spanish banks needed to strengthen their balance sheets, lender Santander lost 1.35% to €5.25, BBVA sank 1.59% to €6.735 and CaixaBank slumped 2.28% to €2.57.

In London, mobile phone giant Vodafone slid 1.57% to 181.45 pence on building anticipation for an epic fight with US group Liberty Global for the takeover of German cable TV operator Kabel Deutschland.

In foreign exchange deals, the European single currency rose to $1.3404 from $1.3396 late in New York on Tuesday.

The dollar dipped to ¥95.17 from ¥95.37 on Tuesday.

On the London Bullion Market, the price of gold edged down to $1,372.75 an ounce from $1,366.75 on Tuesday.