European stocks are seen opening a tad lower on Wednesday, as investors adopt a cautious approach awaiting the outcome of the Federal Reserve meeting which concludes later today.
The Fed may expand its bond-buying program dubbed 'Operation Twist' that is scheduled to end at month end, but a third round of quantitative easing seems unlikely. No matter what the Fed does, traders may take some profits off the table given investor concerns related to Europe and considerable uncertainty on the global economic outlook.
In recent Congressional testimony, Fed Chairman Ben Bernanke said the central bank remains prepared to take action if financial stresses escalate but made no explicit reference to further easing measures.
Asian stocks are trading mostly higher, tracking firm cues from Europe and the U.S. overnight, while the euro eased against the dollar. Commodities are mixed, with oil little changed and copper down modestly.
Official data released today showed that Japan posted a much bigger-than-expected merchandise trade deficit of about $11.5 billion in May, hit by soaring energy costs and weakening demand from struggling Europe.
The meeting of the Group of Twenty nations in Los Cabos, Mexico, concluded Tuesday with the leaders reinforcing their commitment to work collectively to foster growth, create high quality jobs and address the ongoing financial market tensions.
International Monetary Fund managing Director Christine Lagarde said "the seeds of a pan-European recovery plan were planted" in Los Cabos. Europe's intention to consider concrete steps towards a more integrated financial architecture is important and as such "I look forward to discussing this further when I visit Europe this week to finalize the IMF's annual review of the euro area," she added.
Alongside the G20 summit, IMF secured additional funds from 37 countries to create a $456 billion firewall to fight the impact of the global slowdown.
In domestic corporate news, IT services firm Sopra Group said that its new board of directors voted unanimously to separate the roles of chairman and chief executive officer effective 20 August 2012.
Ireland-based Ryanair Holdings Plc said that it plans to make an all-cash offer of 1.30 euros per share for rival Aer Lingus Group Plc, valuing it at about 694 million euros or $879 million.
AstraZeneca Plc and Rigel Pharmaceuticals Inc. revealed an exclusive worldwide license agreement for the global development and commercialization of R256, Rigel's investigational drug for the treatment of moderate to severe chronic asthma.
Global miner Rio Tinto said it is taking the next steps in its phased investment program by committing $4.2 billion to develop its tier one iron ore business.
European stocks ended Tuesday's session sharply higher, as hopes that the Fed may do more to stimulate the world's largest economy outweighed concerns about Spain's fiscal and banking problems.
The Euro Stoxx 50 index of eurozone bluechip stocks climbed 2 percent and the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.6 percent, while around Europe, Switzerland's SMI, France's CAC 40, the U.K.'s FTSE 100 and the DAX of Germany finished up between 1.6 percent and 1.8 percent.
U.S. stocks posted solid gains overnight on continued speculation about the likelihood of further Fed stimulus. Some encouraging U.S. data concerning permits to build new homes and news that Spain has achieved its target at a bond sale auction, albeit at high costs, also supported risk sentiment. The Dow rose 0.8 percent, the tech-heavy Nasdaq gained 1.2 percent and the S&P 500 added a percent.
by RTT Staff Writer
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