European shares dip, Fed stimulus decision awaited

Thu Sep 13, 2012 5:43pm IST

* FTSEurofirst 300 down 0.2 percent

* EADS, BAE drop in heavy trading volumes

By Tricia Wright

LONDON, Sept 13 (Reuters) - European shares dipped on Thursday in light trade, with many investors cautious ahead of a policy decision from the U.S. Federal Reserve due at 1630 GMT which could include further stimulus measures.

Analysts said that markets look priced for a third round of quantitative easing by the Fed, but there are question marks over its timing.

"We're not expecting a huge hurrah from markets over the next week on the basis of any news out of the Federal Reserve (today). And we'd suggest that there's probably room for some disappointment," Andrew Cole, a fund manager at Baring Asset Management, which has 31 billion pounds ($49.9 billion) of assets under management.

"The Fed I think will probably say 'Look, we continue to have all of these tools available and will utilise them as and when we think it's appropriate', but we don't think they're going to use them now. Growth doesn't seem to be such a big problem in the United States."

The FTSEurofirst 300 was down 0.2 percent at 1,105.53 by 1130 GMT, with trading volume at just 37.5 percent of the 90-day daily average.

Economists polled by Reuters put the odds on a third round of bond buying from the Fed at 65 percent in August up from 60 percent previously. Of the 51 who put the chances of QE3 at more than 50 percent, 39 predicted the Fed would act on Thursday following its two-day policy meeting.

"If it decided to withhold any stimulus now... the markets may be a little disappointed, but I don't think there would be a huge sell-off. I think they'd probably just wait for something to happen (in terms of stimulus measures at a later date)," said Mike Lenhoff, chief strategist at Brewin Dolphin.

EADS, BAE BIG FALLERS

Airbus-owner EADS and Britain's BAE Systems were the top fallers across Europe as investors weighed up news they are in advanced talks to create an industry giant that would overtake rival Boeing in sales.

"We believe that in practise the deal would be more about strategic visions than tangible P&L (profit & loss) synergies," Espirito Santo Investment Bank said in a note.

Espirito Santo pointed out that the French and German governments each hold 22.4 percent of EADS, while the British government has a special share in BAE allowing it to veto any foreign entity from owning 15 percent.

It also said it believes the U.S. Pentagon could hold an effective veto on the tie-up, especially because the main strategic logic of the deal is for EADS to gain access to the U.S. market.

EADS was left nursing an 8.3 percent share-price drop, whilst BAE shed 6.7 percent, in hefty trading volume, with that for EADS at nearly eight times its 90-day daily average, and for BAE at more than four times.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Press Event

Press Event

Modi takes tea, but no questions, in first press event as PM.  Full Article 

School Shooting

School Shooting

Two killed, four wounded in Washington state school shooting.  Full Article 

Sundar Pichai Elevated

Sundar Pichai Elevated

Google's Pichai to oversee major products and services.  Full Article 

Need For Reforms

Need For Reforms

Euro zone risks "relapse into recession" without structural reforms - Draghi.  Full Article 

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Health Of Lenders

Health Of Lenders

25 European banks set to fail health checks - sources.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage