By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets moved lower on
Wednesday as rate hikes in Turkey and South Africa failed to calm
jitters over volatility in emerging markets and investors instead
turned their attention to the outcome of the U.S. Federal Reserve
Meeting.
Stoxx Europe 600 index dropped 0.6% to close at 322.38, after
trading as high as 328.02 earlier in the day.
Last week, the benchmark posted its biggest weekly percentage
loss since June after disappointing data from China created renewed
fears of slower 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 2.2391 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 2.3% to 62,088.70. 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 South African Reserve Bank further increased rates on
Wednesday in efforts to stem the turbulence in the rand.
The U.S. central bank was also in the spotlight. 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. stocks traded lower on Wall Street.
Back in Europe, corporate news was in focus. Shares of Mulberry
Group PLC slid 27% 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 4.1% after the Italian car maker reported
fourth-quarter earnings below expectations.
Shares of J Sainsbury PLC lost 2.3% after the supermarket chain
said its chief executive, Justin King, has decided to step down and
will be replaced by Mike Coupe.
On a more upbeat note, shares of Anglo American PLC put on 5.7%
after the miner said production rose across most commodities in the
fourth quarter.
Shares of Osram Licht AG gained 2.5% after the German light-bulb
company confirmed its full-year outlook and reported a rise in
profit for the first fiscal quarter.
Among country-specific indexes, France's CAC 40 index dropped
0.7% to 4,156.98 and the U.K.'s FTSE 100 index slipped 0.4% to
6,544.28. Germany's DAX 30 index fell 0.8% to 9,336.73.
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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