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 Europe's main indices followed the overnight lead from Wall Street
and Asia, although the third-quarter earnings reports out of Europe
weren't quite as solid as those from the United States.
The dollar was under light selling pressure and major government
bond yields were marginally lower, as currency and fixed income
markets anticipated a soothing message from the Fed when it ends its
two-day policy meeting later in the day.
Germany's DAX was up almost 1 percent in early trade, Britain's FTSE
was up half a percent, and France's CAC 40 up a third of one
percent.
MSCI's broadest index of Asia-Pacific shares outside Japan gained
1.1 percent and Japan's Nikkei share average climbed 1.5 percent.
"Markets are banking on the prospect that the Federal Reserve will
do everything in its power to anchor interest rate expectations at,
or below, current levels," said Michael Hewson, chief strategist at
CMC Markets in London.
"Any attempt to alter the (policy statement's) language in anything
other than a dovish fashion could well see markets take fright," he
said.
The Fed is widely expected to announce it will end its two-year-old
stimulus program known as quantitative easing three, as the U.S.
economy continues to gather momentum. The Fed started buying bonds
as far back as late 2008.
Still, Fed officials have also stressed they are in no hurry to take
policy tightening a step further by raising rates from near zero
levels due to subdued inflation and the poor quality of a recovery
in labor markets.
Upbeat U.S. earnings so far have also eased worries that corporate
profits might be squeezed by sluggish global growth. With 245
companies in the S&P 500 <.SPX> having reported earnings so far for
the third quarter, 73.5 percent have beat analyst expectations,
according to Thomson Reuters. Over the past four quarters, 67
percent of companies have beat estimates.
The picture in Europe isn't quite so rosy. About a third of
companies listed on the STOXX Europe 600 benchmark index have
reported results so far this earnings season, with 67 percent of
them meeting or beating profit forecasts, and 59 percent meeting or
beating revenue forecasts, according to Thomson Reuters Starmine
data.
On Wednesday, Germany's largest lender Deutsche Bank announced a
third-quarter net loss, and French oil major Total said net adjusted
profit fell 2 percent.
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In other European corporate news, shares in French pharma group
Sanofi slumped 5 percent after the company's board said it had
decided to oust chief executive Chris Viehbacher.
In currency trading, the dollar was down 0.2 percent against the
Japanese yen at 107.90 yen and the euro was little changed at
$1.2730 , close to Tuesday's one-week high of $1.2765.
The yield on benchmark 10-year U.S. Treasury bonds was down a basis
point at 2.275 percent, as was the German Bund yield at 0.87
percent.
Italian government borrowing costs fell more steeply, prompting a
similar move across peripheral euro zone bond markets, after the
European Commission gave a tentative thumbs-up to Rome's 2015
budget.
Italy, like France, has been campaigning for Brussels to afford it
greater fiscal flexibility in order to nurture fragile economic
growth, although their original budget proposals had to be tweaked.
Ten-year Italian yields dropped 4 basis points to 2.51 percent.
Spanish equivalents, which tend to trade in lock step with their
southern neighbor, also dropped 4 basis points to 2.11 pct.
(Additional reporting by Marius Zaharia; Editing by Susan Fenton; To
read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting;
for the MacroScope Blog click on http://blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
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