By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets rebounded on Wednesday as investors waited to see if the U.S. Federal Reserve will announce a reduction in its monthly asset purchases.
The Stoxx Europe 600 index gained 0.3% to 313.80, after closing down 0.5% on Tuesday.
Banks helped lift the index, with Soci��t�� G��n��rale SA up 1.7% in Paris, Standard Chartered PLC rising 1.3% in London and Banco Santander SA (SAN) 1.4% higher in Madrid.
Shares of Nokia Oyj (NOK) rose 3.1% after Credit Suisse lifted its recommendation on the Finnish firm to outperform from neutral.
"We believe Nokia's transformative deal with Microsoft(MSFT) allows it to drive significant value creation from its vast patent portfolio," the analysts said.
Shares of Smiths Group PLC climbed 2.9% after the engineering company declared a special dividend for the full year.
FOMC meeting in view
More broadly, investors in Europe waited for the U.S. Fed's monetary policy announcement later in the day. Analysts expect the central bank to announce a reduction of $10 billion to $15 billion to its $85 billion-a-month bond-buying program at 2 p.m. Eastern Time, followed by Fed Chairman Ben Bernanke commenting on the decision at a news conference. Read: How stocks may react to the Federal Reserve decision
"With lower inflation and some soft housing data there is no rush to do any strong tapering. The Fed doesn't want to make a policy mistake by tapering too aggressively," said Mark Andersen, head of asset allocation at UBS.
Global stock markets climbed to multiyear highs in May on the back of aggressive easing from central banks globally, but were sent sharply lower when Fed Chairman Ben Bernanke started talking about scaling back the bank's easing program. In recent months, however, markets have rebounded--with the Stoxx Europe 600 reaching a five-year high earlier in the week--as economic data point to gradual recovery.
"At the end of the day we come back to basics. How is the global economy doing? The U.S. looks fairly solid still, the U.K. is recovering beyond expectations, Europe is coming out of recession and China is stabilizing for now. This supports markets at a time where some monetary easing is being withdrawn in the U.S.," Andersen said.
"We maintain our long positions in U.S. equities and U.S. high yield as a consequence," he added.
Analysts at Daiwa Capital Markets said in a note, however, that Wednesday's decision is far from clear-cut, attaching a 40% probability of no tapering.
"But with market expectations clearly slanted towards a first move from the Fed, and with several FOMC members clearly itching to get the process started, a move today on balance looks likely," they said.
"Some are also looking for any tapering to be accompanied by a downward shift in the FOMC's unemployment threshold to 6% from the current 6.5%, in an attempt to convince market participants that the [federal funds rate] will remain at its current level for longer," the analysts added.
U.S. stocks opened mixed on Wall Street.
On the data front in the U.S., U.S. Department of Commerce said construction on new homes inched 0.9% higher in August.
The U.K.'s FTSE 100 index traded 0.2% lower at 6,555.16.
Minutes from the Bank of England's September meeting showed the Monetary Policy Committee voted unanimously to keep both interest rates and the asset-purchase program unchanged.
France's CAC 40 index put on 0.3% to 4,159.57, while Germany's DAX 30 index added 0.3% to 8,620.78.
HeidelbergCement AG climbed 1% after Goldman Sachs lifted the German firm to buy from sell, saying it has the most attractive long-term growth prospects versus its peers.
Shares of Hochtief AG gave up 1.5% after Goldman Sachs cut the construction firm to neutral from buy.
-Sara Sjolin; 415-439-6400; AskNewswires@dowjones.com
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09-18-13 1031ETCopyright (c) 2013 Dow Jones & Company, Inc.
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