By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets erased gains in
midday trade on Wednesday as optimism over a rate hike in Turkey
faded and investors instead turned their attention to the outcome
of the U.S. Federal Reserve Meeting.
Stoxx Europe 600 index dropped 0.4% to 323.01, after trading as
high as 328.02.
Last week, the benchmark posted its biggest weekly percentage
loss since June after disappointing data from China created renewed
fears of global growth, and triggered a sharp selloff in
emerging-markets and risk assets.
In response to the volatility, the Turkish central bank late
Tuesday raised its overnight lending rate to 12% from 7.75% to halt
a slide in the lira and stem capital outflows. Amid the rout for
emerging-market currencies, the Turkish lira (USDTRY) had dropped
to a record low against the dollar and after an initial surge after
the rate hike, it fell back in midday trade in Europe on Wednesday.
A dollar bought 2.2377 lira, after trading as low as 2.1635 earlier
in the day, according to FactSet data.
Turkish stocks also took a move lower, with the ISE National 100
index down 1.9% to 62,340.53. The weakness came as investors
started to focus on the reason for the rate hike, Simon Smith,
chief economist at FxPro, noted in emailed comments.
"Remember, Turkey did not raise rates because the economy is
doing well. It did so because the currency is at an all-time low
and inflation is high, and likely to rise further as a result," he
added.
The U.S. central bank was also in the spotlight on Wednesday.
The Federal Reserve concludes its two-day meeting after the
European market close and is widely expected to make another $10
billion cut in its quantitative-easing program, which will bring
its monthly purchases down to $65 billion. Last month, the Fed
announced it would take the first steps in tapering its aggressive
bond-buying program, reducing it by $10 billion, after months of
speculation. Wednesday's meeting marks the last with Ben Bernanke
as Fed chairman before Janet Yellen takes the helm on Feb. 1.
U.S. stock futures pointed to a lower open on Wall Street.
Back in Europe, corporate news was in focus. Shares of Anglo
American PLC put on 4.7% after the miner said production rose
across most commodities in the fourth quarter.
Shares of Osram Licht AG gained 3.2% after the German light-bulb
company confirmed its full-year outlook and reported a rise in
profit for the first fiscal quarter.
Shares of Mulberry Group PLC slid 26% after the luxury-goods
firm warned its pretax profit for the year ending March 31 will be
substantially below current market expectations.
Fiat SpA dropped 5.6% after the Italian car maker reported
fourth-quarter earnings below expectations.
Shares of J Sainsbury PLC lost 1.8% after the supermarket chain
said its chief executive, Justin King, has decided to step down and
will be replaced by Mike Coupe.
Among country-specific indexes, France's CAC 40 index dropped
0.7% to 4,155.15 and the U.K.'s FTSE 100 index slipped 0.3% to
6,553.72. Germany's DAX 30 index fell 0.2% to 9,387.78.
On the data front, GfK's forward-looking indicator for Germany
showed consumer sentiment rose to a six-year high in February,
raising hopes that stronger domestic demand in Europe's largest
economy will spur solid growth in the euro zone.
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