Europe: Stocks mostly up as traders seek US rate hike clues

[LONDON] Europe's main stock markets closed mostly up Wednesday, with traders awaiting clues on the timing of US rate rises, yet oddly reassured by penalties levied on leading banks for foreign exchange fraud, analysts said.

London's benchmark FTSE 100 index ended the day up 0.17 per cent at 7,007.260 points compared to Tuesday's close.

The CAC 40 in Paris rose 0.31 per cent to 5,133.30 points, while the DAX 30 in Frankfurt ended 0.04 per cent down, at 11,848.47 points.

The Frankfurt and Paris stock markets had surged on Tuesday after a European Central Bank executive board member signalled that the ECB would temporarily ramp up its stimulus programme aimed at boosting the eurozone economy.

In foreign exchange trading Wednesday, the euro dropped to US$1.1086 after trading at US$1.1149 late in New York Tuesday.

US stocks were marginally lower in late morning trading as investors weighed mixed earnings from retailers, and awaited the release of the Federal Reserve minutes of the April monetary policy meeting.

The Dow Jones Industrial Average was down 0.04 per cent to 18,304.89 points.

The broad-based S&P 500 dipped 0.06 per cent to 2,127.83 points, while the tech-rich Nasdaq Composite Index dropped 0.05 per cent to 5,067.60.

Traders in Europe also spent the day anticipating word out of the Fed later Wednesday, which should provide clues about its plan for lifting interest rates from record lows.

"Global equity markets on both sides of the Atlantic saw tentative trading ahead of this evening's release of April's (Fed) meeting minutes as investors weighed up the prospects of further delays in path to rising interest rates," wrote analysts with Sucden Financial Research.

"Since removing its forward guidance earlier this year, the Fed has offered very little insight into when that first rate hike will come and that is making investors quite anxious, particularly around these kinds of releases," noted Craig Erlam, senior market analyst at Oanda trading group.

Once thinking out of the Fed becomes clearer, adds Spreadex analyst, Connor Campbell, the hesitancy of traders should dissipate considerably.

"With the Fed minute meetings to come tonight some kind of movement is almost guaranteed; investors might just need to wait for it," Mr Campbell said.

Attention had also been directed towards the fines imposed on banks by British and US regulators over the rigging of foreign exchange markets.

US regulators on Wednesday fined Swiss bank UBS US$342 million for manipulation of forex markets, and later slapped Barclays Bank, JPMorgan Chase, Citicorp and the Royal Bank of Scotland (RBS) with nearly US$6 billion in penalties for conspiring to manipulate the massive currency market.

Despite the heavy hit, investors appeared to have been fearing even worse fines. Shortly after the announcement, RBS shares were up 1.78 per cent to 354.70 pence and Barclays won 3.37 per cent to 271.55 pence.

"All of this was music to Barclays' investors' ears, as its stock soared by 3 per cent following the news," said Mr Campbell.

"It seems that investors are keen to draw a line under this saga, and given that Barclays holds around £2.5 billion in provisions, i.e. roughly US$3.9 billion, despite the 'record breaking' aspect of the fines Barclays looks set to escape relatively, and for many frustratingly, unscathed."

UBS shares gained 3.23 per cent to 20.46 Swiss francs in Zurich.

AFP