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European shares followed Asian stocks higher on Wednesday and the dollar held steady before a Federal Reserve meeting that’s expected to lay the groundwork for the first increase in US interest rates in nearly a decade.
The Fed is widely expected to remove the word “patient’’ from its statement on the timing of its first hike since 2006, possibly paving the way for policy tightening as early as June.
“Our base case is that they will remove ‘patience’. If we get that and a measured message on the dollar’s impact on inflation then, given the slight retracement we have seen in the first half of this week, I think the dollar will do well,’’ said Michael Sneyd, a currency strategist with BNP Paribas in London.
The pan-European FTSEurofirst 300 stocks index rose 0.2 per cent at 1,587.40 points, led by Spanish fashion giant Inditex, which reported a rise in 2014 profit.
Asian markets
Earlier, shares rose across Asia. Tokyo’s Nikkei index rose 0.6 per cent to a 15-year high on expectations of economic recovery and higher shareholder returns.
Chinese stocks rose for a sixth successive session in anticipation of fresh government stimulus. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.4 per cent. China’s average new home prices fell at their fastest pace on record last month, data showed on Wednesday.
MSCI’s main index of Asia-Pacific shares outside Japan rose 1.9 per cent.
Dollar rally
The dollar, which has risen more than 20 per cent against major currencies over the past year in anticipation of higher US rates, held steady before the Fed announcement, due at 1800 GMT, and a news conference by Fed Chair Janet Yellen 30 minutes later.
While the trajectory of US rates is clear, some analysts say recent weak economic data may delay any move beyond June.
“The impact from the dollar’s rally already represents a form of tightening, so the Fed is in no rush to raise interest rates,’’ said Philippe Ithurbide, head of research, analysis and strategy at Amundi. The first increase might not come until after September, he said.
Against a basket of its peers, the US currency was down less than 0.1 per cent.
US Treasury yields edged down after falling in New York on Tuesday following weak housing starts data. Ten-year yields were last at 2.05 per cent compared with 2.06 per cent in New York.
The euro, which fell to a 12-year low last week as the European Central Bank began a €1 trillion bond-buying programme designed to boost growth and inflation, was up 0.1 per cent at $1.0607. The dollar was barely changed at 121.30 yen.
Sterling was flat at $1.4746 before closely watched wage and unemployment data and finance minister George Osborne’s last national budget before parliamentary elections on May 7.
Political uncertainty pushed the pound to a five-year low against the dollar on Friday. Depending on the outcome, the election could trigger a referendum on whether Britain will stay in the European Union.
Bund auction
German government bond yields fell before an auction of 10-year debt expected to meet strong demand, amid concern the ECB’s bond-buying will lead to a scarcity of top-rated debt. Ten-year yields fell 1.8 basis points to 0.266 per cent.
Brent crude oil edged down towards $53 a barrel after a forecast that US crude stockpiles would reach record highs, maintaining a global supply glut. Brent last traded at $53.46.
Gold lifted off four-month lows, with market participants cautious before the Fed announcement. Spot gold last traded at $1,147.10 an ounce.
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