European stocks are seen opening on a cautious note Wednesday, as investors closely examine the U.S. Federal Reserve's proposal to use money from its mortgage securities investments to buy government debt on a small scale.
As expected, the Federal Open Market Committee, the monetary policy-setting arm of the Federal Reserve, said it decided to leave interest rates unchanged and reiterated that rates are likely to remain exceptionally low for an extended period. The Fed also said that it would reinvest funds from maturing mortgage-backed securities to maintain the current size of its balance sheet.
However, Asian stocks eased on Wednesday, dragging the MSCI Asia Pacific index down by about 1.3 percent, as measures announced by the Fed failed to ease concerns about the pace of recovery in the world's largest economy. Crude oil prices are currently subdued below $ 80 a barrel and trading in the U.S. index futures suggest that the Dow could fall 73 points at the opening bell on Wednesday.
Overnight, U.S. stocks closed notably lower after the Federal Reserve left interest rates unchanged while acknowledging that the economic recovery has lost some steam in recent months. The Dow lost about half a percent, while the Nasdaq fell by 1.2% and the S&P 500 eased 0.6%.
In economic news, consumer confidence in the United Kingdom declined sharply in July, according to a report issued Wednesday by the Nationwide Building Society. Nationwide's consumer confidence index fell 7.0 points from June to a reading of 56.0, sending the index to its lowest level since April 2009. The sharp pull back was blamed on the government's sharp budget cuts, high inflation and elevated levels of unemployment.
The Bank of England's latest quarterly inflation report along with claimant count data from the U.K. are due later in the day. The central bank is expected to lower its GDP growth forecast for 2011, reflecting the higher VAT rate coming into effect next year. In May, the bank had forecast the economy to grow 3.5% in 2011.
In corporate news, specialty biopharmaceutical company Shire Plc announced the divestiture of its brain stimulant medicine Daytrana to Noven Pharmaceuticals, Inc., granting Noven global marketing rights for the medicine, effective October 1, 2010.
Touax SA said it has increased its shipping container utilization rate to a record 97.1 percent in July.
Nestle Group reported first-half profit attributable to shareholders of the parent of CHF 5.450 billion compared to CHF 5.071 billion in the prior year.
The European markets closed in the red Tuesday, as shares of miners slumped amid data showing a slowdown in Chinese imports. Negative cues from the U.S. and Asian markets also dampened sentiment. The U.K.'s FTSE 100 Index closed down 0.63%, the German DAX Index shed 1.03% and France's CAC 40 lost 1.24%.
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