Europe close: Stocks edge lower ahead of Fed meeting

European stocks wavered on Wednesday as caution set in ahead of the Federal Reserve’s latest policy announcement.

The benchmark DJ Stoxx Europe 600 managed to eke out gains of 0.04% to end at 341.00, France’s CAC 40 drifted 0.22% lower to end the day at 4,463.00 and Germany’s DAX was 0.50% firmer at 9,983.41.

At the same time, oil prices recovered, supported by data from the US Energy Information Administration on Wednesday showing crude stockpiles rose 1.3m barrels last week, which was much less than expected.

Sentiment was also boosted after the Qatari oil ministry said members of the Organization of the Petroleum Exporting Countries will meet oil producers in April to discuss an output cap.

West Texas Intermediate was up 3.8% at $37.78 a barrel and Brent crude was up 2.68% to $39.83.

With the Fed widely expected to stand pat on interest rates – the target range for the federal funds rate is expected to remain on hold at 0.25% to 0.50% – investors will be paying close attention to what chairwoman Janet Yellen has to say in the press conference.

One of the key areas to watch for will be any mention of the balance of risks to the economic outlook. Back in January, the FOMC dropped language from the previous statement that said risks to the outlook for economic activity and the labour market were balanced.

“Many economists expect the central bank will reintroduce their assessment on Wednesday and note that risks are again ‘nearly balanced’ as they did in October,” said Atif Latif, director of trading at Guardian Stockbrokers.

“Another change in the January statement was a reference to global economic and financial developments. Although the FOMC did not associate whether this was a positive or a negative to the balance of risks, this was seen as a dovish move by the FOMC. Since then however, financial conditions have eased notably and the outlook for the global economy has stabilised. It is therefore possible that this language is dropped which many believe would signal a more positive outlook,” said Latif.

According to Bloomberg, the consensus expectation was now for just two more interest rate hikes from the Fed in 2016.

In the UK, meanwhile, Chancellor George Osborne announced he would cut the corporation tax to 17% by 2020 from 20% and raise the individual tax free personal earnings allowance to £11,500.

The Federal Open Market Committee rate announcement was due after the European close at 1800 GMT.

In corporate news, London Stock Exchange and Deutsche Boerse were both on the front foot after agreeing the terms of a merger.

Belgian chemical company Solvay rose after saying it will divest its stake in a joint venture with Ineos earlier than planned.

Brenntag racked up solid gains after the German chemical distribution firm posted better-than-expected 2015 profit.

On the downside, German industrial group Bilfinger slumped after saying it will not pay a dividend for 2015 and posting a wider loss.

Zodiac Aerospace was also under the cosh after it said profit this year was likely to be flat.

Tour operators Thomas Cook and TUI were in the red after Citigroup downgraded its ratings on the stocks.

Hikma Pharmaceuticals dropped after in-line 2015 results but a weaker-than-expected outlook for this year.