European Stocks Are Little Changed Before Fed Decisions

By Namitha Jagadeesh - Dec 12, 2012 12:06 PM GMT+0400

European (SXXP) stocks were little changed as investors awaited the Federal Reserve’s decisions on interest rates and economic stimulus even as American lawmakers continued talks on a new budget. U.S. index futures were little changed, while Asian shares advanced.

Imagination Technologies Group Plc (IMG) climbed 3.7 percent after posting first-half earnings that beat analyst estimates. Accor SA (AC) fell 2.1 percent after saying a ruling by France’s highest court will increase its tax payment.

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Financial traders work at their desks at the Frankfurt Stock Exchange in Frankfurt, Germany. Photographer: Ralph Orlowski/Bloomberg

The Stoxx Europe 600 Index rose less than 0.1 percent to 280.61 at 8:05 a.m. in London. The benchmark measure gained for the last seven days, the longest winning streak since July 2011, as U.S. President Barack Obama struck a conciliatory note on talks to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year. Standard & Poor’s 500 Index futures slipped less that 0.1 percent today, while the MSCI Asia Pacific Index added 0.5 percent.

“Markets appear to be expecting further easing measures, over and above the $40 billion of mortgage-bond purchases already committed to, simply because U.S. politicians continue to squabble over a deal to cut spending and raise taxes,” said Michael Hewson, a market analyst at CMC Markets Plc in London. “There is a worry that there may well be no agreement by the time January 1 comes around.”

Fed Policy

The Federal Open Market Committee, which began a two-day meeting yesterday,will announce its interest-rate decision at 12.30 p.m. in Washington, followed by forecasts on economic growth, unemployment and inflation.

The Fed will expand economic stimulus by announcing $45 billion in monthly Treasury purchases in addition to its program to buy $40 billion in mortgage bonds each month, according to a Bloomberg survey of economists.

Obama lowered his demand for tax increases to $1.4 trillion from $1.6 trillion even though Democrats and Republicans remain divided on taxes and spending, as well as on whether a year-end deal should include an increase in the debt limit and fresh programs to boost the economy.

In Asia, Japan’s machinery orders rose for the first time in three months, a report showed. Orders, an indicator of capital spending, gained 2.6 percent in October from the previous month, the Cabinet Office said in Tokyo. The median estimate of 25 economists surveyed by Bloomberg News called for a 3 percent increase.

Greek Buyback

In the euro area, Greece bought back enough bonds to meet a target necessary to obtain further aid from the International Monetary Fund and European Union, a government official said late yesterday.

Imagination rallied 3.7 percent to 465 pence after the company reported first-half earnings of 5.4 pence a share, higher than the average analyst estimate of 5.2 pence. The U.K. maker of chip technology for tablets and smart phones said its target of reaching an annual shipment of 1 billion units by 2016 remains a “realistic objective,” as it expects to ship 500 million units this year.

PSA Peugeot Citroen advanced 3.8 percent to 5.12 euros after Europe’s second-largest carmaker said it will eliminate 1,500 job positions in addition to the 8,000 announced in July. The auto company, whose shares have dropped 53 percent so far this year, will make the cuts by not replacing people who leave, according to spokesman Jonathan Goodman.

Separately, Le Figaro newspaper reported that Peugeot will cut a total of 11,200 jobs by the middle of 2014.

Accor slipped 2.1 percent to 25.66 euros after saying France’s highest court has asked the hotelier to pay 149.7 million euros in taxes.

Inditex dropped 1 percent to 102.55 euros even after the world’s largest clothing retailer said net income climbed 27 percent to 1.66 billion euros ($2.20 billion) in the nine months through October, matching the average analyst estimate in a Bloomberg survey.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net