European stocks climb ahead of Fed decision on bond buying program

European stocks rose on Wednesday, hours before the Federal Reserve announced plans to accelerate its exit from the massive bond-buying program that has helped stabilize markets at the height of the coronavirus pandemic .

The Stoxx Europe 600 index gained 0.4% at the start of the session after closing 0.8% on Tuesday. London’s FTSE 100 lost 0.2% and the German Dax rose 0.4%. In Asia, Hong Kong’s Hang Seng index fell 1% and Tokyo’s Nikkei 225 rose 0.1%.

Investors’ attention will however be focused on Washington where, after two days of talks, US central bankers are preparing to deliver their verdict on the speed at which to reduce asset purchases.

“The Fed is likely to accelerate the cut and raise rates by the summer, that’s for sure, maybe even sooner,” said Jorge Garayo, global head of inflation strategy at Société Générale.

He added that even the emergence of the highly infectious variant of the Omicron coronavirus was unlikely to derail the central bank’s plans: “The variant is unlikely to interfere with its script. Everyone thinks [the Fed] will speed up reduction. . . if they don’t, it would be a surprise ”.

Pressure on policymakers to hasten the end of their crisis measures increased on Tuesday when the Bureau of Labor Statistics announced a record rise in producer prices in the United States. Wholesale prices rose 9.6% in the 12 months to the end of November, the largest annual increase on record since 2010.

The Consumer Price Index, released by the BLS last week, rose 6.8% from a year ago – the fastest annual pace since 1982. The data has led some moderate Democrats concerned by the electoral fallout from high prices to call for an immediate tightening of monetary policy. Politics.

Across the Atlantic, the European Central Bank and the Bank of England are due to make monetary policy announcements this week.

While most analysts expect the ECB not to turn off its monetary stimulus taps until at least 2023, a combination of growing Omicron infections, slowing growth and high prices have divided opinions on the market. how the BoE should act.

IMF Managing Director Kristalina Georgieva on Tuesday put her head above the parapet, urging UK rate-setters to “withdraw the exceptional support provided in 2020” or risk inflation to hit around 5.5% at the end of the day. early next year.

Britain’s Office for National Statistics said on Wednesday inflation hit an annual rate of 5.1% in November, down from 4.2% the month before. This is the highest price growth rate in a decade.

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