Europe stocks tread water before Fed announcements

The European single currency yesterday rose to $1.3567, from $1.3546 late in New York.

AFP/London

Europe’s main stock markets held steady yesterday as investors held their breath ahead of the US Federal Reserve’s latest monetary policy meeting, and tracked fighting in Iraq.

London’s FTSE 100 rose 0.17% to 6,778.56 points, while Frankfurt’s DAX 30 added 0.10% to 9,930.33 points, but the CAC 40 in Paris slipped 0.13% to 4,530.37 points.

Madrid rose 0.49% and Milan added 0.15%.

Meanwhile the European single currency rose to $1.3567, from $1.3546 late in New York.

The Fed will wrap up a two-day policy meeting later in the day.

While policymakers are widely expected to continue winding down their stimulus, investors will be watching to see if Fed chief Janet Yellen gives any hints about future policy.

The Fed has consistently pointed to the middle of 2015 at the earliest time-frame for raising benchmark rates. But better unemployment and inflation data could challenge that time-frame.

“Investors are widely expecting Janet Yellen to announce a further $10bn taper to the monthly bond purchasing programme,” said dealer Sam Fox at SpreadEX financial trading site.

“However with a high inflation figure of 0.3% yesterday there is an increased chance of a hawkish outlook by Yellen,” he added.

Wall Street stocks slid lower as investors there awaited the outcome of the key Fed meeting.

The Dow Jones Industrial Average fell 0.24% to 16,768.49 in midday trading.

The broad-based S&P 500 slipped 0.02% to 1,941.99, while the tech-rich Nasdaq Composite Index slid 0.15% to 4,330.85.

At the same time, traders remain nervous about fast-moving events in key crude-producer Iraq.

Militants attacked the nation’s biggest oil refinery yesterday, as the prime minister scrambled to regain the initiative by sacking security commanders and reaching out to political rivals.

Clashes erupted at around 4.00 am (0100 GMT) at the Baiji refinery in Salaheddin province, north of Baghdad.

“Continued violence in Iraq is still affecting the markets, though traders are focussed on the Federal Reserve’s policy meeting decision later,” said ETX Capital analyst Daniel Sugarman.

World oil prices edged higher, with Brent rising towards $114 per barrel, but held below last week’s nine-month peak of almost $115.

Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, said the immediate impact from global oil supply from the attack on the Baiji refinery was likely to be “limited”.

“However, if the ISIL forces continue to make progress towards Baghdad and onto Iraq’s main oilfields in the south, the current oil price stabilisation is likely to be short lived and we could see a significant spike in oil prices,” she added.

In London, Royal Dutch Shell added 1.5% to 2,407.5 pence on higher oil prices, along with news it would reduce its stake in Australia’s Woodside Petroleum by $5bn.

Shares in H&M slid 0.45% despite the Swedish fashion giant beating analyst expectations with a first quarter net profit rising 25% from a year earlier to 5.8bn kronor.

In foreign exchange activity, the British pound dipped against the dollar and euro as minutes showed that the Bank of England was unanimous in its decision to maintain record-low interest rates earlier this month.

The central bank’s Monetary Policy Committee (MPC) voted 9-0 to keep its key rate at 0.50%, where it has stood since March 2009 to stimulate growth.

BoE governor Mark Carney had hinted last week that the bank could lift rates sooner than expected, prompting analysts to price in an increase by the end of the year.

The pound dipped to $1.6951, down from $1.6961 on Tuesday.

The euro meanwhile advanced to 80.03 British pence from 79.85 pence.