By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- After the strongest rally in two months,
European stocks suffered broad-based losses on Tuesday, as
investors stayed cautious ahead of the outcome of the U.S. Federal
Reserve meeting on Wednesday.
The Stoxx Europe 600 index dropped 0.7% to close at 311.31 after
rising 1.3% on Monday.
Posting the biggest loss in the index, shares of CGG tanked
nearly 17% after the oil-services firm said it is "operating in
difficult market conditions" and fourth-quarter earnings will be
impacted by project delays.
Shares of Admiral Group PLC gave up 2.2% in London after the
U.K.'s Competition Commission said it is looking into ways to lower
car insurance costs. The move comes after a report on the GBP11
billion ($17.93 billion) industry showed motorists were shouldering
unnecessary costs.
Shares of Zurich Insurance Group AG gained 1.9% after the Swiss
firm appointed the chief financial officer from fellow insurer
Swiss Re AG, George Quinn, as its new financial boss. Swiss Re
shares fell 1%.
More broadly, investors were still waiting for the all-important
two-day Federal Reserve meeting kicking off later Tuesday. The main
question remains whether the central bank will start cutting its
asset purchases at this point or leave the tapering until next
year.
After a recent string of solid data and a budget deal in
Washington, analysts say the possibility of tapering at the
December meeting has gone up, although they are still divided as to
whether the stronger economic outlook will be enough for the Fed to
reduce its bond buying. The decision is out Wednesday, after the
European markets close.
Another central bank, Sweden's Riksbank, was in the spotlight
after it cut its main interest rate by 25 basis points to 0.75%, in
an effort to stave off lower inflation.
On the data front in Europe, German economic expectations
smashed forecasts in December, hitting their highest level since
April 2006, according to the ZEW survey of analysts and
institutional investors. The sentiment survey rose to 62 points
from 54.6 points in November, beating economists' expectations of
an increase to 55 points and indicating economic growth will speed
up next year.
In the euro zone, the European Union's statistics agency said
the annual rate of inflation rose to 0.9% from 0.7%, in line with
its preliminary estimate, but well below the European Central
Bank's target of just below 2%.
Inflation in the U.K. fell in November to 2.1% from 2.2% in
October, marking its lowest level in four years. The slowdown
brings inflation closer to the BOE's target of 2% and should
reinforce the bank's commitment to keep interest rates low until
unemployment falls.
"The fact that inflation has been so much closer to the target
over the past couple of months should convince markets that the
period of high inflation is now behind us and makes it easier for
BOE Governor Mark Carney to continue with his forward guidance,"
said Philip Shaw, chief economist at Investec Securities, in a
note.
Among major country-specific indexes, the U.K.'s FTSE 100 index
rose 1.3% to 6,522.20, while France's CAC 40 index slid 1.2% to
4,068.64. Germany's DAX 30 index lost 0.9% to 9,085.12.
Dixons Retail PLC dropped 5% in London after the
consumer-electronics firm said the second half of the fiscal year
looks more challenging than the first half.
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