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 Asian and particularly Chinese bourses ended stronger than they
started but that could not prevent the pan-European FTSEurofirst 300
falling just over 0.7 percent ahead of what were expected to be
similar falls on Wall Street.
There was still some grogginess after gadget giant Apple forecast
its first revenue drop in 13 years on Tuesday, but the main pressure
was once again from oil which sank back toward $30 a barrel
following its latest attempt at a bounce.
Brent was down 2 percent at $31.12 per barrel with U.S. crude 3.3
percent lower at $30.40. Currencies followed a now familiar dance,
with the dollar down against the yen, although it gained less
than usual against oil-linked peers like the rouble.
Bond markets were firmly focused on the Fed's post-meeting
statement, due at 1900 GMT (2 p.m. ET). After the rocky start to
2016 Fed followers are now expecting only one more rate hike this
year rather than the four Janet Yellen and her colleagues were
suggesting in December.
"(Markets are) pretty much treading water ahead of the FOMC (Federal
Reserve)," said Societe Generale strategist Alvin Tan. "We are
expecting a somewhat more dovish tone considering the turbulence in
global markets since the start of the year."
U.S. Treasury yields nudged up, with the benchmark 10-year Treasury
note yield tip-toeing back above 2 percent as the more
interest-rate-sensitive two-year yield hovered at 0.8567 percent.
Yields were also a touch firmer in Germany, but lower in southern
Europe as small rises in French consumer and industry confidence and
Italian retail sales did little to alter expectations that the
European Central Bank is readying to cut its interest rates again.
Italian bonds were given an extra boost by an accord between the
country and the European Commission to help Italian lenders shed
some of their 200 billion euros of bad loans. [GVD/EUR]
Monte dei Paschi, the world's oldest bank, saw its shares, which
have lost more than half their value since the end of 2015, jump as
much as 5 percent.
"Now we have this agreement, the risk of an Italian banking crisis
has eased," said DZ Bank strategist Daniel Lenz.
OIL SPILL
There was little in the way of U.S. data on the slate ahead of the
Fed later, although there was a slew of fresh company results to
digest.
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No. 2 U.S. wireless carrier AT&T was down 2.4 percent in pre-market
deals after below estimate revenues, while TripAdvisor took a
5.5 percent flight south after Goldman Sachs cut its rating on the
stock to "sell".
Overnight, a late rally in China reversed an early 3 percent drop
and helped MSCI's broadest index of Asia-Pacific shares outside
Japan finish 0.5 percent higher.
Tokyo's Nikkei closed up 2.7 percent and the Australian dollar rose
after one measure of inflation came in slightly above forecasts.
Valuations have taken a beating in Asia this year.
The benchmark Hong Kong stock market index is now trading at a
price-to-earnings multiple of 7.4 times, its lowest since the 2008
crisis, while the China enterprises index is at a multiple of less
than 6 times, its cheapest since December 2001.
"The Hang Seng China Enterprises index is currently priced for a
credit event, which we think is slightly extreme," said Michelle
Leung, CEO of Xingtai Capital Management, a hedge fund focused on
Chinese consumer stocks.
The retreat in oil prices in Europe also began to weigh on other
commodity markets. Copper, which is seen as highly attuned to global
growth, sagged to $4,525 tonne by 0704 GMT, after a 2.7 percent gain
in the previous session.
Traditional safe-haven gold meanwhile hovered near a 12-week high at
1,117 an ounce.
"The world's economic condition doesn't seem to give the Fed reason
to hike rates soon given the growth risks," said Barnabas Gan,
analyst at OCBC Bank in Singapore.
(Editing by Catherine Evans)
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