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Europe: Stocks fall awaiting Fed rate decision

Wednesday, October 28, 2015 - 07:09

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The Federal Reserve building in Washington Sept 1, 2015.

[LONDON] Europe's major stock markets retreated on Tuesday as investors cautiously awaited a US Federal Reserve meeting to give clues on the timing of an interest rate increase in the world's top economy.

The US central bank's two-day gathering, which concludes on Wednesday, comes amid more signs of a sluggish global economy.

"UK and European stocks edged lower on Tuesday, trimming a little more off the huge gains seen last week," said CMC Markets analyst Jasper Lawler.

"Risk avoidance is still reigning supreme before the interest rate decision from the Federal Reserve on Wednesday." London's benchmark FTSE 100 index shed 0.81 per cent to end the day at 6,365.27 , after news of a third-quarter slowdown for the British economy.

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In the eurozone, the Paris CAC 40 fell 1.02 per cent to close at 4,847.07 points and Frankfurt's DAX 30 gave up 1.01 per cent compared with Monday's close to finish at 10,692.19 points.

Traders are hoping for more guidance on the Fed's timetable for raising interest rates, with speculation brewing that it will delay any move until next year owing to recent turmoil on global markets and weakness in China.

The Fed is expected to again delay raising borrowing costs and leave its key rate near zero, where it has stood since December 2008 to stimulate economic growth.

US stocks were lower on Tuesday, with data showing another fall in durable goods orders and mixed earnings underscored worries about declining revenue at many companies.

Around mid-day in New York, the Dow Jones Industrial Average had slid 0.33 percent to 17,565.53.

The broad-based S&P 500 fell 0.34 per cent to 2,064.05, while the tech-rich Nasdaq Composite Index slipped 0.15 per cent to 5,027.27.

New US durable goods orders fell for a second straight month in September, by 1.2 per cent, highlighting persistent sluggishness in the manufacturing sector.

Dow members DuPont and Pfizer and delivery giant UPS were among the companies reporting lower sales, a trend that analysts say also is indicative of slow growth.

NEW BOJ STIMULUS?

Most Asian markets also retreated on Tuesday as investors look ahead to a central bank meeting in Japan as well this week.

In London trading, the US dollar fell to 120.36 yen from 121.07 yen late Monday in New York and the euro dipped to US$1.1036 from US$1.1059 over the same period.

The yen was edging up ahead of a Bank of Japan (BoJ) meeting where it faces pressure to unveil fresh stimulus following a string of below-par economics data.

Calls for more measures have grown since China's interest rate cut last week and hints from the European Central Bank that it could widen its own easing programme in December.

"The Fed and the BoJ meetings this week are pivotal events that will determine whether this rally can go any higher," Angus Nicholson, an analyst at IG Markets Ltd. in Melbourne, told Bloomberg News.

"If we see the Fed push back raising interest rates toward 2016 and the BoJ step up stimulus, that will have a big positive impact on equities."

Back in Europe, the Italian government pushed forward with its biggest privatisation in over a decade by listing over a third of shares in the postal service on the Milan stock exchange.

The shares, launched at 6.75 euros, immediately shot up to 6.95 euros but then fell back and closed off 0.74 per cent at 6.7 euros. Milan's index overall lost 1.15 per cent.

The listing, which at 6.75 euros per share valued the postal service at 8.8 billion euros, should bring the Italian state nearly 3.4 billion.

AFP

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