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European shares edge up as industrials gain; Fed meet in focus

European shares edge up as industrials gain; Fed meet in focus
By Reuters
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By Ankika Biswas

- European shares edged higher on Wednesday as industrial stocks gained, while investors awaited the outcome of the U.S. Federal Reserve's first policy meeting this year.

The pan-European STOXX 600 was up 0.3% by 0943 GMT, after clocking its biggest January gain since 2015 at 6.7%, on hopes of better-than-expected corporate earnings and signs of economic resilience.

A survey by S&P Global showed that the downturn in euro zone manufacturing activity eased further last month, price pressures alleviated and the fall in demand moderated.

Industrials stocks were among the top sector performers, up 0.8%.

Sweden's Husqvarna jumped 5.6% to the top of the STOXX 600 after the Swedish gardening power tools maker reported better-than-expected fourth-quarter sales, while Danish drug maker Novo Nordisk rose 0.6% on strong 2023 sales growth expectations.

BBVA gained 1.4% after the Spanish bank's fourth-quarter net profit rose 17.6% year-on-year, thanks to a strong performance in Mexico.

Swiss drugmaker Novartis fell 1% as analysts pointed to weakness in its key drugs Cosentyx and Zolgensma.

Earnings growth estimates for STOXX 600 companies during the fourth quarter have halved to 7.3% from 14.5% at the start of January, Refinitiv data showed on Tuesday.

The Fed is widely expected to raise its benchmark interest rates by 25 basis points to 4.50%-4.75% at 1900 GMT (2 p.m. ET).

Investors will also watch out for Chair Jerome Powell's news conference to assess whether the rate-hiking cycle is coming to a close and for signs on how long rates could stay elevated.

Data on Tuesday showed that U.S. labour costs increased at their weakest pace in a year in the fourth quarter as wage growth slowed, suggesting that the U.S. central bank's fight against inflation was taking hold.

"It's also going to be important to note how the Fed sees rates evolving," said Daniela Hathorn, senior market analyst at "We're still trying to determine what the terminal rates will be."

However, Wall Street futures slipped into the red, after a strong stock performance in January, on caution ahead of the Fed's policy outcome.

Investors also awaited policy decisions by the European Central Bank and the Bank of England that are likely to raise their key rates by 50 bps each on Thursday.

Euro zone inflation eased for a third straight month to 8.5% in January, but underlying price growth held steady and concerns have already been raised about the reliability of the figures.

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