Europe close: Stocks little changed before FOMC delivers policy
European stocks were little changed as investors weighed the UK Budget, UK jobs data and the Bank of England’s (BoE) meeting minutes ahead of the Federal Reserve’s policy announcement.
The minutes of the BoE’s 4-5 March meeting showed Monetary Policy Committee (MPC) members voted unanimously to keep interest rates at 0.50% and the asset purchase programme at £375bn.
Policymakers expect Bank Rate to remain below average historical levels for some time to come, warning of the risk that sterling could strengthen and leave inflation below target for longer.
All members of the MPC agreed it was more likely than not that BoE interest rates would rise over the next three years.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "We maintain our view that an interest rate hike from 0.50% to 0.75% is most likely in February 2016 - but we still would not be at all surprised if the Bank of England acted just before the end of 2015.
The UK's Office for National Statistics also released labour market data that showed the unemployment rate remained unchanged at 5.7% in the three months to January, compared to forecasts for a drop to 5.6%.
UK employers added 143,000 jobs during the quarter, better than the 130,000 predicted by analysts. Weekly earnings grew 1.6% across the period, slowing from the previous month’s’ 1.7% increase and missing projections for a 1.8% gain.
Jobless claims fell 31,000 in February, more than the 30,000 forecast.
“Unless wages and business investment start rising, the recovery is looking worryingly fragile with its dependence on consumers and susceptibility to spending being hit by any rise in inflation,” warned Chris Williamson, chief economist at Markit.
In the euro-area, a report showed construction output increased 3% in January after a 2.7% fall a month earlier.
The Eurozone trade balance narrowed to €7.9bn in January from €24.3bn the prior month, trailing estimates of €15bn, as exports came in flat and imports declined.
The euro rose 0.53% to $1.0653.
Oil and gas, beverage stocks gain on UK Budget tax cuts
Chancellor George Osborne’s 2015 UK Budget revealed tax cuts for the North Sea oil and gas sector, a reduction in alcohol duty and an increase in the bank levy.
In an effort to stimulate investment in the North Sea oil and gas amid a slump in crude, tax cuts worth £1.3bn will be introduced, along with a generous tax allowance to stimulate investment. Brent crude rose 1.5% to $54.37 following the release, ICE data showed.
Shares in UK listed pub landlords, brewers and beverage advanced as Budget included a cut duty on beer by 1p for the third successive time. JD Wetherspoon, Greene King, SABMiller and Diageo were all lifted by the news.
The Budget will also include a 0.21% rise in the rate of the bank levy, raising £900m.
Capital Economics chief UK economist Vicky Redwood said: “Chancellor George Osborne has stuck to his word and delivered a fully-funded budget despite the fact that an election is just around the corner. Clearly he decided that it would play better with the electorate to emphasise his fiscal prudence rather than resort to some blatant pre-election bribery.” But she warned that it would take four years of "deep spending cuts" and "very low" interest rates throughout most of the next parliament in order to reach the chancellor's intended budget surplus by 2019.
Interest rates in focus as Fed delivers policy
The Federal Reserve is expected to drop the term ‘patient’ from its message on interest rates as it delivers its latest policy decision at 18:00 GMT. The central bank is projected to hold back on any increase in rates but the market will be looking for clues on the timing of the first hike when Fed Chair Janet Yellen speaks at a press conference at 18:30 GMT.
Philip Marey, senior US strategist at Rabobank, said given the recent better-than-expected labour market data, the FOMC is likely to open the door to a June rate hike. “In fact, the Fed seems intent on preparing the markets for the first rate hike,” he said.
Large and Holcim higher on deal talks
Lafarge SA and Holcim jumped on reports they are in talks to name Bruno Lafont as co-chairman of their combined company to rescue a $40bn merger.
National Bank of Greece SA and Alpha Bank AE dropped to lead Greece’s ASE Index lower amid concerns about the country’s finances.
RWE edged higher following reports the German utility is looking to sell a 10% stake to Abu Dhabi investors.
Renault SA and Bayerische Motoren Werke AG slumped as an index of European automakers declined for a second day, following a record rise on Monday.
Standard Chartered advanced after Barclays upgraded the shares to ‘overweight’, citing the positives of a new chief executive officer.
Inditex SA rallied as the clothing retailer posted annual profit in line with analysts’ estimates and said sales rose 13% at the start of the first quarter.
SBM Offshore NV gained after agreeing to collaborate with Brazilian authorities investigating companies for corrupt contracts with state-run Petroleo Brasileiro SA.