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Europe: Stocks rise before Fed decision; SABMiller, AB InBev gain

[FRANKFURT] SABMiller Plc led European shares higher, while investors count down to the Federal Reserve's interest rate decision due tomorrow.

SABMiller soared 20 per cent after saying that Anheuser- Busch InBev NV intends to make a takeover proposal. The Belgian brewer jumped 6.4 per cent. Richemont gained 6.6 per cent after the world's biggest jewelry maker said five-month sales accelerated amid higher demand in Japan and Europe. Hermes International SCA added 3.8 per cent. Inditex SA rose 5.9 per cent after the owner of Zara reported a 26 per cent surge in profit.

The Stoxx Europe 600 Index climbed 1.5 per cent to 361.87 at the close of trading. The measure, which has risen 5.8 per cent since a low in August after China devalued its currency, is still 13 per cent below its April peak.

"The AB InBev news shows companies are still confident to engage in M&A despite the uncertainties of what's happening with the central banks' outlook," said Jasper Lawler, London-based market analyst at CMC Markets Plc. "There's a slow-burning economic recovery but with a slight gearing towards the lower- budget end of the market, which is where Zara fits in. Inditex is capturing the kind of general trend." Investors are split on what action Fed policy makers will take. Traders give a28 per cent chance of a rate increase, up from as low as 26 per cent Monday but still well below the 50 per cent odds before China roiled markets by devaluing the yuan.

"I don't think there's going to be a rate hike this time, but the markets are ready for it and even if they don't hike, the language will be quite hawkish," said Mr Lawler.

"This meeting is so highly anticipated that probably even a hike would result in the following week a little lift for the markets just out of relief the meeting is out of the way."

Investors are also weighing a report showing US consumer prices declined in August, which may feed into the Fed's deliberations on when to increase borrowing costs.

Among stocks moving on corporate news, Glencore Plc advanced 5.2 per cent after selling$2.5 billion of new shares to pay down debt to help protect its credit rating amid a rout in commodities prices.