By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets rebounded on
Wednesday as investors waited to see if the U.S. Federal Reserve
will announce a reduction in its monthly asset purchases.
The Stoxx Europe 600 index gained 0.4% to close at 313.28, after
ending down 0.5% on Tuesday.
Banks helped lift the index, with Société Générale SA up 1.8% in
Paris, Standard Chartered PLC rising 1.4% in London and Banco
Santander SA (SAN) 1.6% higher in Madrid.
Shares of Nokia Oyj (NOK) rose 4.1% after Credit Suisse lifted
its recommendation on the Finnish firm to outperform from
neutral.
"We believe Nokia's transformative deal with Microsoft(MSFT)
allows it to drive significant value creation from its vast patent
portfolio," the analysts said.
Shares of Smiths Group PLC climbed 2.6% after the engineering
company declared a special dividend for the full year.
FOMC meeting in view
More broadly, investors in Europe waited for the U.S. Fed's
monetary policy announcement later in the day. Analysts expect the
central bank to announce a reduction of $10 billion to $15 billion
to its $85 billion-a-month bond-buying program at 2 p.m. Eastern
Time, followed by Fed Chairman Ben Bernanke commenting on the
decision at a news conference. Read: How stocks may react to the
Federal Reserve decision
"With lower inflation and some soft housing data there is no
rush to do any strong tapering. The Fed doesn't want to make a
policy mistake by tapering too aggressively," said Mark Andersen,
head of asset allocation at UBS.
Global stock markets climbed to multiyear highs in May on the
back of aggressive easing from central banks globally, but were
sent sharply lower when Fed Chairman Ben Bernanke started talking
about scaling back the bank's easing program. In recent months,
however, markets have rebounded--with the Stoxx Europe 600 reaching
a five-year high earlier in the week--as economic data point to
gradual recovery.
"At the end of the day we come back to basics. How is the global
economy doing? The U.S. looks fairly solid still, the U.K. is
recovering beyond expectations, Europe is coming out of recession
and China is stabilizing for now. This supports markets at a time
where some monetary easing is being withdrawn in the U.S.,"
Andersen said.
"We maintain our long positions in U.S. equities and U.S. high
yield as a consequence," he added.
Analysts at Daiwa Capital Markets said in a note, however, that
Wednesday's decision is far from clear-cut, attaching a 40%
probability of no tapering.
"But with market expectations clearly slanted towards a first
move from the Fed, and with several FOMC members clearly itching to
get the process started, a move today on balance looks likely,"
they said.
"Some are also looking for any tapering to be accompanied by a
downward shift in the FOMC's unemployment threshold to 6% from the
current 6.5%, in an attempt to convince market participants that
the [federal funds rate] will remain at its current level for
longer," the analysts added.
U.S. stocks traded lower on Wall Street.
On the data front in the U.S., U.S. Department of Commerce said
construction on new homes inched 0.9% higher in August.
Europe movers
The U.K.'s FTSE 100 index closed 0.2% lower at 6,558.82, weighed
by the benchmark's mining firms as most metals prices moved lower.
Shares of Rio Tinto PLC (RIO) dropped 1.3% and BHP Billiton PLC
(BHP) fell 0.6%.
Minutes from the Bank of England's September meeting showed the
Monetary Policy Committee voted unanimously to keep both interest
rates and the asset-purchase program unchanged.
France's CAC 40 index put on 0.6% to 4,170.40, while Germany's
DAX 30 index added 0.5% to 8,636.06.
HeidelbergCement AG climbed 1.4% after Goldman Sachs lifted the
German firm to buy from sell, saying it has the most attractive
long-term growth prospects versus its peers.
Siemens AG (SI) picked up 1.3% after the industrial conglomerate
said Ralf Thomas, a longtime Siemens veteran, will become chief
finance officer with immediate effect.
Shares of Hochtief AG gave up 1.6% after Goldman Sachs cut the
construction firm to neutral from buy.
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