European Stocks Steady ahead of Fed's Policy Decision

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By Prasanth Aby Thomas | January 30, 2013 7:12 PM EST

European stocks remained steady in the opening minutes of trade as investors awaited the US Federal Reserve's policy announcement and initial fourth-quarter GDP estimates.

The UK's FTSE 100, Spain's IBEX and France's CAC-40 remained little changed. Italy's FTSE MIB was up 0.4 percent while Germany's DAX gained 0.1 percent. The pan-European FTSEurofirst 300 index remained little changed at 1,177.63.

The single currency jumped to a 21-month high against the yen, trading at 122.94 yen while remaining firm against the dollar at about $1.35.

Asian markets had closed higher earlier as domestic quarterly earnings reports boosted sentiments ahead of the Fed's decision.

Japan's Nikkei average ended 2.28 percent higher to 11113.95 while South Korea's KOSPI was up 0.43 percent to 1964.43. Australia's S&P/ASX 200 added 0.16 percent to 4896.70.

China's Shanghai Composite Index gained 1 percent to 2382.47 while Hong Kong's Hang Seng rose 0.74 percent to 23831.05 towards close.

The official preliminary release of the US fourth quarter Gross Domestic Product (GDP) is set for release during the day followed by the conclusion of the Federal Reserve's two-day policy meet.

Analysts expect the economy to expand 1 percent, down from the 3.1 percent in the third quarter considering the fiscal uncertainties caused by the natural calamities like superstorm Sandy towards the end of 2012. 

But this is not expected to prompt the Fed into further action at the moment, given the recent improvement in sentiments. However, traders will be looking for hints on QE3's termination date.

"Friday's nonfarm payroll report will be more influential," said Adam Chester, head of UK macroeconomics at Lloyds Bank.

"Having increased the pace of open-ended QE to $85bn (£53bn, $62bn) per month in December, and with no press conference scheduled, the Fed looks almost certain to keep policy on hold".

In Spain, Catalonia has asked for an extra €9bn in bailout money from the Spanish central bank, citing debts and deficit reduction goals. The amount adds to the €5bn that the region had requested earlier. It also comes just a month after the region's leaders promised to hold a referendum on independence.

Eurozone business and consumer confidence figures are set for release during the day.

Domestic corporate quarterly earnings dominated Asian market sentiments. In South Korea, chip manufacturer SK Hynix ended 0.62 percent higher after the company reported a fourth quarter net profit, mainly due to higher demand for Microsoft's Windows 8 phone chips.

Earnings reports were mixed in Japan. Yahoo Japan rose 17.14 percent after reporting strong performance supported by advertising revenues. Komatsu gained 2.18 percent despite the firm reporting a 28 percent profit drop, and slashed its growth forecast. Fujifilm Holidngs struggled, but managed to rise into the green after reporting lower-than-expected quarterly figures.

Meanwhile, official figures from Japan's Ministry of Economy, Trade and Industry showed that the country's retail sales rose 0.4 percent year-on-year in December, down from the 1.2 percent registered in the previous month.

In South Korea, sentiments were further boosted after official data showed that the country's industrial output advanced for the fourth straight month in December. Output in mining, manufacturing, gas and electricity industries gained 1 percent from the previous month, down from the 2.6 percent gain in November, but beating expectations of a contraction.

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