European Stocks Slip

By Ishaq Siddiqi
 

LONDON—European stock markets fell Wednesday, as a lack of a concrete solution to Greece's debt turmoil hampered the markets' enthusiasm for gains ahead of the Federal Reserve's policy meeting in which participants are expecting new monetary easing measures to jumpstart the U.S. economy.

London's FTSE 100 was recently 0.2% lower at 5354.23, the DAX in Frankfurt fell 0.6% to 5535.34 and the CAC-40 in Paris shed 0.7% to 2963.78. Traders said share markets in Europe and on Wall Street are expected to face another volatile session Wednesday as investors await a policy announcement from the Fed at 1815 GMT.

"Lack of any concrete news, either from the bullish or bearish side has led us to trade with low volumes and little conviction over the last few sessions, and with no significant update again from Europe, we may see this trend continue," said Lloyds Corporate Markets. Attention will remain on Greece and whether the country will receive its next loan tranche.

Greece reported progress Tuesday in talks with the troika—the International Monetary Fund, European Commission and European Central Bank—over fresh austerity measures the country must take to meet its deficit goals, but failed to clinch a deal that would secure the country the next installment of aid. "We see the payment of tranche remaining as a overhang for the markets into the first week of October," added Lloyds.

At the August meeting, the Fed had almost committed to near-zero rates for the next two years. "Since then, worries over European debt crisis have further intensified, consumer and business confidence have plunged, jobless claims have continued to trend upwards—all leading to an increased risk aversion" added Lloyds.

Other than the Fed, the Bank of England will publish its meeting minutes at 0830 GMT. Economic data Wednesday includes U.K. public-sector net borrowing at 0830 GMT and U.S. existing home sales at 1400 GMT.

European corporate news helped inject some positivity into the market. Shares in Imperial Tobacco rose 1.4%, after it said it is on track to meet full-year expectations with tobacco sales expected to rise around 2% on a constant currency basis, driven by demand in emerging markets.

Asian stock markets were mostly higher Wednesday, but buyers lacked conviction amid caution ahead of the outcome of the Fed meeting. Japan's Nikkei Stock Average was up 0.2%, Australia's S&P/ASX 200 rose 0.8%, while South Korea's Kospi Composite advanced 0.9% in choppy trade. Hong Kong's Hang Seng was off 1.5%, but the Shanghai Composite Index rose 2.6%.

In currency markets, the dollar fell to a one-month-low against the yen as investors speculate that the Fed will be aggressive in easing its policies to prop up the world's largest economy.

The dollar was recently buying ¥76.30 from ¥76.46 late Tuesday in New York. The euro was at $1.3675 from $1.3703, and at ¥104.34 from ¥104.76. Elsewhere, November crude oil futures were down $0.64 at $86.36 a barrel. In the metal market, spot gold was at $1,814.70 a troy ounce, up $5.60 from New York trade Tuesday.

In the European bond markets, the December German bund contract was little changed at 137.38.