European Stocks Decline on Day of Much-Awaited Fed Decision

Updated on
  • RWE climbs on report of Aabar Investment mulling stake
  • Stocks have been volatile in days leading up to Fed move

On the day investors find out if the Federal Reserve is ready to raise rates for the first time in nine years, European stocks fluctuated before closing lower.

The Fed announces its decision after European markets close, ending weeks of speculation that has added to volatility. Equities swung between gains and losses today, as they have done for three of the past four sessions. The Stoxx Europe 600 Index fell 0.2 percent at the close of trading, after rising 0.2 percent and dropping as much as 0.4 percent.

“This Fed meeting has been talked to death over the past few weeks,” said Daniel Murray, London-based head of research at EFG Asset Management. “The outcome is just so open, with a plethora of possible options. If you hike and give a dovish message, like committing to not hiking for the rest of the year, you then remove the uncertainty for future meetings.”

Traders are pricing in a 30 percent probability of the Fed increasing borrowing costs today. While that’s up from about 28 percent on Monday, it’s well below almost even odds before China’s currency devaluation roiled markets last month.

Best Bet

European stocks may offer the best refuge from market turmoil triggered by higher U.S. interest rates. Money has flowed into the region’s equity funds in 16 out of last 17 weeks, and investors are betting corporate profits and central-bank easing will help its shares outperform U.S. peers.

A gauge of mining shares posted the worst performance among Stoxx 600 groups, with Rio Tinto Group and Antofagasta Plc falling more than 2.1 percent.

Rotork Plc plunged 11 percent after forecasting annual revenue below analysts’ estimates and saying the second half of the year will be challenging.

Spain’s IBEX 35 Index advanced 1.3 percent, led by gains in lenders. Bankia SA rallied 9.3 percent after Morgan Stanley raised its rating on the stock to the equivalent of a buy. Banco de Sabadell SA and Banco Popular Espanol SA climbed at least 4.6 percent after HSBC Holdings Plc upgraded the lenders.

RWE AG jumped 9 percent after a report that Aabar Investments PJSC is close to investing in the German utility. RWE said it won’t pursue selling a stake.

Ocado Group Plc rallied 8.4 percent after Morgan Stanley began coverage of the shares with an overweight rating and Deutsche Bank AG upgraded the online grocer.