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Europe open: Markets cautious ahead of Fed policy meeting

European stocks were slightly lower at the opening on Wednesday as investors stood back ahead of the US Federal Reserve’s policy decision later in the day.
The pan-European STOXX 600 index was down 0.18% in early trading.

“As tends to be the case on Fed Wednesdays, the markets were cautious-to-negative out on the gate,” said Spreadex analyst Connor Campbell.

“After some vaccine heat at the start of the week, investors can get back to their other recent preoccupation – bond yields, interest rates and rising inflation.”

“Though the Bank of England’s (Governor) Andrew Bailey and (chief economist) Andy Haldane have expressed concern over rising inflation – the latter talking of ‘taming’ the inflationary tiger – the Fed’s (chair) Jerome Powell has been slightly more sanguine – much to the displeasure of investors.”

“Continued reluctance to view the movement in yields with the same concern as equities investors could create a problem for the markets heading into the end of the week.”

The rising cost of borrowing has been a growing concern for investors on fears that higher inflation will hinder the economic recovery from the pandemic. The U.S. central bank’s policy statement and economic forecasts are due at 1800 GMT.

In equity news, shares in BMW rose after the car maker said it expected a significant year-on-year increase in group pre-tax profit in 2021.

BT and Vodafone were among the top performers after the UK government auctioned a new tranche of 5G mobile network spectrum for £1.36bn.Engine maker Rolls-Royce was a high riser after an upgrade to ‘neutral’ from ‘underweight’ by JPMorgan Cazenove.

Outsourcer Capita gained after announcing it was simplifying its business into three divisions from six, as it posted a decline in full-year pre-tax profit after taking a hit from the pandemic.

On the downside, shopping centre owner Hammerson slumped, having risen sharply a day earlier after saying it was looking to convert a former flagship Debenhams in Leicester into housing.

Upper Crust owner SSP fell after saying it was looking to raise £475m via a rights issue as it anticipated slower recovery from the impact of the pandemic on the travel industry, while Trainline was weaker after a downgrade at Panmure.

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