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Europe midday: Stocks hold lower ahead of Fed, Spanish stocks weigh

Wed 20 September 2017 11:44 | A A A

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(ShareCast News) - European stocks are little changed amid modest pressure on Spanish stocks on the back of the latest news around the attempted independence referendum in Catalonia and ahead of the US Federal Reserve's policy decision later in the session.

As of 1206 BST, the benchmark Stoxx 600 was edging lower by 0.03% or 0.11 points to 382.01, alongside a drop of 0.09% or 10.92 points to 12,551.70 for Germany's Dax although the Cac-40 was managing to keep its head above water, gaining 0.15% or 7.78 points to 5,245.53.

Out in the euro area periphery however, Spain's Ibex 35 was down by 0.82% or 85.40 points to 10,292.80, with shares in construction group ACS, Banco Sabadell and Inditex trading at the bottom of the pile.

In parallel, the yield on the benchmark 10-year Spanish government note was off by one basis point to 1.55%, having dipped to 1.53% earlier.

Ahead of the 1 October plebiscite, on Wednesday Spanish police arrested 12 local government officials after they pressed ahead with plans for a poll despite it having been ruled illegal by the country's Constitutional Court.

Commenting on market expectations ahead of the US central bank's policy meeting, Michael Hewson, chief market analyst at CMC Markets UK said: "The main question surrounds the timing of when the next rate rise is likely to come, and for this there is a school of thought that suggests the market is under-pricing the prospect that we could get one more hike this year, in December.

"This is why particular attention is likely to be focussed on the dot plot projections of where US policymakers see the potential glide path for rates into next year. It is unlikely that Fed officials will want to take the prospect of a December move off the table, so it would be a surprise to see any changes to the short term predictions, but there is a whole raft of factors that could delay the prospect of a move in December, and see fewer projected increases into 2018."

Wednesday's economic calendar was quite light, with only German producer price figures for August out earlier which revealed a 2.6% pace of increase year-on-year (consensus: 2.5%).

Significantly perhaps, outside of energy prices were higher by just 2.6% on the year, versus a rise of 2.5% in the month before, according to Claus Vistesen at Pantheon Macroeconomics.

Nontheless, Vistesen pointed out recent gains in Chinese producer prices, typically a good lead indicator for imported manufacturing goods.

Later in the day, existing home sales data in the States at 1500 BST were expected to reveal a slight increase in the annualised pace of sales from the 5.44m hit in July to 5.47m for August.

They would be followed by the release of the Federal Open Market Committee's policy statement at 2000 BST and chair Janet Yellen's press conference a quarter of an hour afterwards.

Meanwhile, on the corporate front, Thyssen Krupp and Tata Steel agreed to combine their European steel activities via a 50-50 joint venture, in the process creating Europe's second-largest steelmaker.

In other news, Hochtief was reportedly studying a potential bid for Spanish firm Abertis.

Another German company, Heidelberg Cement clinched a deal to purchase Italian outfit Cementir Holding for €315m.

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