European shares edge up on retail, healthcare boost; Fed decision eyed

By Ankika Biswas

(Reuters) – Europe’s benchmark index rose marginally on Wednesday, led by healthcare and retail stocks, with investors bracing for a policy decision by the Federal Reserve later in the day. The pan-European STOXX 600 was up 0.2% by 0930 GMT, after hitting a near two-week high intraday, and set for its third straight day of gains. Trade volumes are expected to be light due to an All Saints’ Day observance.

The index registered its worst monthly performance in over a year in October, hurt by concerns about economic growth and interest rates staying higher for longer.

Capping gains in equities, however, was a rise in euro zone bond yields ahead of the Fed’s policy outcome at 1800 GMT, where it is widely expected to hold its interest rates steady.

“There is always some nervousness ahead of an FOMC meeting, given that there is always the potential for a surprise,” said Stuart Cole, chief macro economist, Equiti Capital.

Data on Tuesday which showed inflation in the euro zone fell fast and the economy began to contract – the dual impact of ECB’s steady rate hikes, also remained in focus.

“The market is taking comfort from falling CPI and the suggestion this has for rates in the euro-zone is to have peaked. The poor GDP figures also suggest that the ECB will be reluctant to tighten policy any further,” Cole added.

ECB vice-president Luis de Guindos welcomed the fall in inflation, particularly in underlying measures, but policymaker Joachim Nagel noted the need to keep rates sufficiently high for long.

Retail stocks, rose 1.3% and led sectoral gains, boosted by a 3.8% advance in Britain’s Next on raising its full-year profit outlook for the fourth time in six months.

Healthcare stocks also climbed 1%, with GSK gaining 1% after raising its full-year profit and sales forecasts for a second time.

Barry Callebaut was the top STOXX 600 gainer, up 4.5% after posting full-year results in-line with expectations and an updated medium- to long-term targets based on its new strategy.

Meanwhile, Denmark’s Orsted slumped 20% to the bottom of STOXX 600 following a bigger-than-expected third-quarter loss after it took a $4 billion impairment charge and decided to abandon two U.S. wind projects.

Swedish builder Skanska dropped 11.3% after reporting third-quarter operating earnings well below expectations.

Of the STOXX 600 that have reported earnings to date, 57.6% beat analyst estimates, LSEG data showed on Tuesday.

(Reporting by Ankika Biswas in Bengaluru; Editing by Savio D’Souza and Varun H K)