European shares follow Asia lower, dollar weak before Fed

[April 29, 2015]  By Nigel Stephenson
 
 LONDON (Reuters) - Stocks fell in Europe on Wednesday, following Asian stocks lower, while the dollar held near two-month lows before a Federal Reserve policy statement expected to show the U.S. central bank in no hurry to raise interest rates.

The Fed wraps up its two-day meeting with the U.S. economy in something of a soft patch - data due later on Wednesday is expected to show growth slowed sharply in the first quarter - that has weighed on the dollar and, in the view of many analysts, pushed back the first U.S. rate rise since 2006.

The dollar index <.DXY>, which measures the greenback against a basket of currencies, fell 0.2 percent to its lowest since March 5, despite a rise in U.S. Treasury yields that took the 10-year yield <US10YT=RR> over 2 percent for the first time in a month.

The euro <EUR=> was up 0.1 percent at $1.0994, having hit a three-week high on Tuesday and come within a whisker of $1.10. The yen <JPY=> was down 0.1 percent at 118.90.

European shares gave up early gains to trade slightly lower on Wednesday as investors digested a batch of mixed corporate results from bank BBVA <BBVA.MC> and UK retailer Next <NXT.L>, among others. The pan-European FTSEurofirst 300 index <.FTEU3> was down 0.1 percent.

"If corporate results are good you can continue to see positive openings and some stocks will perform very well but the move yesterday suggests people are taking risk off the table and that can continue at least this week," Mike Reuter, a broker at Tradition said.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> retreated 1 percent having touched their highest since early 2008 at one point.

Chinese shares rose, however, with gains in resources stocks and start-ups offseting losses in banks. The CSI300 <.CSI300> index of the largest listed companies in Shanghai and Shenzhen rose 0.7 percent.

Trade in Asia was thinner than usual with Japanese markets closed for a holiday.

On Wall Street, the Dow <.DJI> had ended Tuesday with gains of 0.4 percent, while the S&P 500 <.SPX> rose 0.28 percent and the Nasdaq <.IXIC> dipped 0.1 percent.

The biggest boost to the Dow was a 1.9 percent gain in IBM <IBM.N> shares after the company raised its quarterly dividend by 18 percent, the biggest increase in five years.

Apple <AAPL.O> hit a record high after stellar results, but still ended down 1.6 percent. Shares of Twitter <TWTR.N> dropped as much as 24 percent after its results disappointed, before closing with a loss of 18.2 percent.

In European fixed income markets, investors awaited a slew of bond issuance, from Germany, Italy and Portugal.

FED STATEMENT

The Fed's policy statement is due at 1800 GMT. Before that, data is expected to show the U.S. economy grew at a 1.0 percent annual pace in the first quarter, down from 2.2 percent in the previous three months.

"Investors are approaching FOMC with the view it will bore as much as possible. The risk is that what is neutral to the Fed may be surprisingly upbeat to the market," said analysts at Citi.

"We would not see this as a big near-term boost to the dollar and bond yields, but more a reminder that the Fed remains hopeful that data will improve sufficiently for a lift-off in September."

Oil prices fell as oversupply and weak demand outweighed uncertainty over the impact of Saudi King Salman bin Abdulaziz's decision to sack his younger half-brother as crown prince in favor of his nephew.

Brent crude <LCOc1> fell 28 cents to $64.36 a barrel.

Gold traded near three-week highs with the dollar soft. Spot gold <XAU=> last traded at $1,207.72 an ounce.

(Additional reporting by Wayne Cole in Sydney, Francesco Canepa, John Geddie and Anirban Nag in London)

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