🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Shares

GLOBAL MARKETS-Oil lifts European shares, caution reigns ahead of Fed

Published 16/03/2016, 08:38 pm
© Reuters.  GLOBAL MARKETS-Oil lifts European shares, caution reigns ahead of Fed
EUR/USD
-
USD/JPY
-
UK100
-
FCHI
-
DE40
-
JP225
-
BP
-
LCO
-
ESZ24
-
CL
-
FTEU3
-
MIAPJ0000PUS
-
CSI300
-
DXY
-

* Asian shares slip, Europe up on oil

* Dollar firms ahead of Fed

* UK investors focus on Osborne budget

By Jamie McGeever

LONDON, March 16 (Reuters) - Shares were mixed and the dollar rose on Wednesday as markets awaited the outcome of the U.S. Federal Reserve's policy meeting, seen leaving interest rates on hold but the door open for further increases later in the year.

Investors have welcomed the easing of the intense volatility that swept through financial markets in the first two months of the year, but are aware that calmer conditions mean the Fed might be more inclined to resume its policy tightening soon.

That supported the dollar, which gained most ground against the yen after Bank of Japan governor Haruhiko Kuroda said the central bank had room to slash interest rates to around -0.5 percent from -0.1 percent at present.

European shares bucked the trend in Asia, rising in early trade thanks to a recovery in oil prices following two days of losses that had culminated in a decline of around 5 percent.

In Britain, investors were eyeing a budget presentation during which finance minister George Osborne is expected to cut public spending and warn that the domestic economy will not escape the global economic turbulence unscathed.

"Given that stocks have been trading near multi-week highs, more prudent players in the markets pared back some of their recent exposure ahead of the conclusion to today's Federal Reserve rate meeting," said Michael Hewson, chief markets strategist at CMC Markets.

"Having said that, today's oil rebound has led to a slightly higher open this morning in Europe."

In early European trade, the FTSEuroFirst 300 index of leading shares was up 0.4 percent at 1,346 points .FTEU3 . Germany's DAX was 0.7 percent higher, France's CAC 40 up 0.5 percent .FCHI and Britain's FTSE 100 gained 0.4 percent .FTSE .

Oil prices managed a bounce after data from industry group the American Petroleum Institute (API) showed U.S. crude stockpiles rose by less than half what analysts had expected.

U.S. crude CLc1 gained 1.7 percent to $36.96 a barrel, while Brent LCOc1 rose 1.3 percent to $39.27, lifting resources stocks. Shares in BP BP.L were up 2 percent.

In Asian trading, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged down 0.1 percent, and Japan's Nikkei .N225 took a knock from an initial rise in the yen and fell 0.8 percent.

MSCI's global share index was last down 0.1 percent, while U.S. futures pointed to a slender rise of 0.1 percent at the open on Wall Street ESc1 .

LOSING THE (DOT) PLOT

While no rate move is expected at the Fed's meeting it does include updates of members' economic projections and a news conference with Chair Janet Yellen, events that have caused violent market reactions in the past.

Hurting sentiment on Tuesday were downward revisions to retail sales that left consumer spending looking a lot softer. One result was that the Atlanta Fed "GDPNow" measure of economic growth dropped to 1.9 percent for the first quarter from 2.2 percent.

On the other hand, financial market volatility has subsided in recent weeks. The Fed had pointed to this uncertainty as one reason behind its decision in January not to follow the previous month's historic rate hike with another rise.

This highlights the tough balancing act the Federal Open Market Committee (FOMC) must perform at its meeting.

Analysts generally assume Fed projections for interest rates -- widely known as the "dots" -- will indicate only three hikes are likely this year instead of four. Yet the market is pricing in just one move of 25 basis points for 2016.

"We do not expect that the Fed will raise rates today. Instead, we may see a consensus forming for a next rate hike in June," analysts at Rabobank said in a note on Wednesday.

"Meanwhile the FOMC's dot plot still includes an expectation of four rate increases this year, which seems excessive. We may therefore see the FOMC bring down the number of rate hikes predicted in the dot plot to three."

The dollar was up a quarter of 1 percent against a basket of currencies .DXY and had reversed an earlier slip against the yen to trade 0.4 percent higher at 113.65 yen JPY= . The euro slipped 0.2 percent back below $1.11 EUR= .

Sterling was also down a little against the dollar at $1.4120 GBP= before the budget, in which Osborne will try to get his austerity drive, and his own political ambitions, on track without upsetting voters before June's EU referendum. Shanghai CSI 300 and global effects interactive

https://t.co/YqIYLIbInP Chinese A-shares vs developed and emerging stocks

http://link.reuters.com/rac25w

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Catherine Evans)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.