Markets

European Equities Close Higher Ahead of US Rate Decision; Higher UK Jobs, Eurozone Inflation Growth Underpin Bullish Sentiment

European stocks closed higher on Wednesday as traders maintained optimism that the Federal Reserve would raise interest rates for the first time in nine years, and the U.K. reported an increase in employment in Q3 and the pace of inflation advanced modestly across the Eurozone.

US interest rates have been frozen at 0.25% since June 2006. The historically low rate, introduced at the height of the global financial crisis, has been the subject of ongoing speculation for the past 12 months.

A raft of positive economic data - including two stellar jobs reports and members of the Federal Reserve stating that a rate rise in 2015 is not off the cards - have triggered widespread expectations that a hike will be announced following Wednesday's Federal Open Market Committee meeting, which is scheduled to end at 2:00 pm ET.

In macro-economic news, public and private sector employment rose in the UK with the employment rate standing at 73.9% in Q3, the highest rate since records began in 1971, according to the Office of National Statistics. In contrast, the rate of unemployment stood at 5.2%, down from 6.0% one year earlier. This is the lowest rate of unemployment since Q4 of 2005.

Euro area annual inflation rose to 0.2% in November compared to 0.1% in October, according to Eurostat, the statistical office of the European Union. The largest upward drivers came from the sale of vegetables, fruit and goods sold at restaurants and cafes. Fuels for transport, heating oil and gas had the biggest negative impacts on inflation.

The European Central Bank (ECB), which is targeting medium term inflation of just below 2.0%, has been purchasing EUR 60 billion ($65.56 billion) of government bonds per month since March in a bid to trigger faster growth in the shared currency union. At its most recent meeting, convened earlier in December, the bank opted to extend the duration of its asset-purchase scheme to March 2017 from an original deadline of September 2016, with a potential for further extension, if necessary.

In company news, British bank Standard Chartered led gainers on the FTSE 100, surging 6.4%. Publishing and education company Pearson followed with a 5.2% rise, and Rolls Royce, a maker of engines and power systems gained 4.9%. Shire, a health care company, was 4.0% higher and mining companies Anglo American, Glencore, and BHP Billiton were 2.6%, 2.4%, and 2.3% higher, respectively.

On the DAX, electricity and gas company RWE was the biggest gainer, rising 3.4%, followed by energy major E.ON climbing 1.4%. Real estate firm Vonovia, kidney dialysis company Fresenius and automakers BMW and Daimler all closed 0.8% higher. Insurance provider Allianz ended 0.6% higher.

And, on the CAC-40, aircraft manufacturer Airbus Group rose by 2.0%, while construction and media conglomerate Bouygues and SAFRAN, a producer of rocket engines, both closed 1.6% higher. French bank Societe Generale followed with a 1.5% gain. Wines and spirits seller Pernod Ricard was 1.3% higher and Alcatel-Lucent, an ultra-broadband access provider, edged up by 1.0%.

The FTSE 100 closed 0.72% higher, the DAX inched up by 0.18% and the CAC-40 gained 0.22%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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