Europe: Technology shares support stocks with Federal Reserve meeting in focus

[BENGALURU] European shares rose on Wednesday helped by stronger technology and healthcare stocks, but weakness in the retail and energy sectors capped gains ahead of a Federal Reserve policy announcement.

The pan-European Stoxx 600 closed 0.3 per cent higher to end a five-session losing streak.

Technology stocks led gains, adding 1.3 per cent after a recent bout of selling while healthcare stocks climbed 1.1 per cent.

A disappointing earnings update from Zara owner Inditex weighed on retail shares and, along with lower oil stocks, capped the broader gains.

Crude oil prices dropped for the third session on rising demand risks from the spread of the Omicron variant of the coronavirus.

Investors were cautious ahead of the Federal Reserve's monetary policy decision due at 1900 GMT as expectations are the central bank will hint at slowing its bond purchases.

"We do not expect a major hike cycle to start next year, as inflation peaks then, which should give the Fed more time to act and then see what the impacts are before being too aggressive," said Jeremy Gatto, a multi-asset portfolio manager at Unigestion.

"With Omicron uncertainty, and the big central bank meetings, it's going to mean more choppiness going into the weeks ahead."

The Stoxx 600 is up about 1.7 per cent so far in December, in what is typically a strong month for global equity markets.

London's FTSE 100 dropped 0.7 per cent, a sixth consecutive decline and the worst losing streak since the pandemic hit in March 2020, on weakness in retail, oil and travel stocks.

Data showed British consumer price inflation soared to a more than 10-year high of 5.1% year-on-year in November ahead of the Bank of England's meeting on Thursday.

The European Central Bank is also meeting on Thursday, with policymakers expected to decide how to adapt the bank's regular asset purchase programme (APP) once the much larger pandemic-fighting PEPP scheme ends in March.

Sweden's H&M fell 2.8 per cent after the company's quarterly sales matched expectations but analysts flagged sales in China as a concern. Sales at Inditex and H&M are back at pre-pandemic levels or better.

Support services provider DCC jumped 9.0 per cent after announcing its acquisition of Almo Corp for about US$610 million.

Shares of IAG dropped 5.1 per cent after the British Airways parent said it was in advanced talks to cancel its purchase of rival Air Europa from Spain's Globalia.

Swedish bank SEB slipped 2.2 per cent on being hit with a 511 million euro (S$785.4 million) tax demand from Germany.

REUTERS