European markets rise before Fed rate decision

European markets rise before Fed rate decision

London: European equities edged higher Wednesday, lifted by overnight gains on Wall Street and buoyant commodity prices, with investors on tenterhooks before a US Federal Reserve interest rate call.

The FTSE 100 index gained 0.56% to 5,171.31 points in London morning deals.

Frankfurt’s DAX 30 advanced 0.54% to 5,740.19 points and in Paris the CAC 40 added 0.48% to 3,841.51 points.

The DJ Euro Stoxx 50 index of top eurozone shares climbed 0.49% to 2,895.43 points.

Later Wednesday, the Federal Reserve will conclude a two-day meeting and is expected to reaffirm its massive economic stimulus program as it seeks to support a fragile recovery from recession.

Analysts say the Fed is certain to keep a near-zero interest rate along with an array of programs to keep credit flowing.

The accompanying statement could provide hints on the speed and shape of the economic recovery, and any monetary policy response in the coming months.

“All eyes (are) on the Fed rate announcement and the tone of any accompanying statement," said Arifa Sheikh-Usmani, equity trader with financial betting firm Spreadex.

“I would expect markets to trade fairly sideways until that comes out later," she added.

“We are still seeing clients buying on weakness which shows that there is still some momentum in the market, however, the rally is certainly less enthusiastic than it was a couple of weeks ago."

The Federal Open Market Committee (FOMC), headed by Fed chairman Ben Bernanke, will issue a statement at 11:45pm.

In foreign exchange trade on Wednesday, the dollar fell to a new one-year low against the euro amid expectations that US interest rates will remain low for a considerable length of time.

The dollar has fallen sharply this week as many investors sold safehaven assets on the back of growing economic optimism, dealers said.

The European single currency jumped as high as $1.4842 on Wednesday, before pulling back to $1.4799.

“The dollar remains under pressure as stocks rise and risk appetite continues to improve," said Calyon analyst Stuart Bennett.

“The bullish (positive) sentiment for stocks is likely to keep the dollar under pressure whilst the main focus today is on central banks."

Wall Street on Tuesday hit fresh 2009 highs on economic recovery optimism and company earnings prospects.

The Dow Jones Industrial Average gained 0.52% to 9,829.87 points.

The tech-heavy Nasdaq composite rose 0.39% to 2,146.30 while the broad-market Standard & Poor’s 500 index added 0.66 percent to 1,071.66 points.

Meanwhile, leaders of the G-20 key developed and developing countries will kick off two-day talks in the US city of Pittsburgh, Pennsylvania, on Thursday.

They are expected to discuss ways to unwind their unprecedented support to fight the global economic crisis - although they remain cautious for fear of jeopardizing a return to growth.

The Tokyo stock market will reopen on Thursday after a series of public holidays.