Europe close: Stocks rise ahead of Fed announcement

European stocks finished higher following a weak start to trading on Wednesday ahead of the US Federal Reserve’s interest rate announcement and as crude oil futures bounced back.

The benchmark DJ Stoxx Europe 600 index gained 0.31%, while Germany’s DAX and France’s CAC 40 advanced 0.59% and 0.54%, respectively.

“With China remaining unstable, Apple forecasting falling growth in iPhone sales, oil prices fragile and European banks confirming further provisions there appears little to entice investors,” said Rebecca O’Keeffe, head of investment at Interactive Investor.

“However, despite the three pivotal areas of concern, China, the Fed and oil, dominating market sentiment, the dramatic turnaround in European equity markets yesterday and the prospect that global central banks will provide underlying support for markets is giving some glimmer of hope for investors. The extensive fears that have plagued markets so far this year appear to be diminishing.”

Oil prices rose despite fresh figures from the US Energy Information Administration which revealed a 7.6m barrel (consensus: 4.0m) stockbuild in the country´s commercial oil stockpiles.

As of 17:41GMT West Texas Intermediate futures were up by 2.75% at $32.34 and those for Brent crude by another 3.5% at $32.91.

The Stoxx 600 oil and gas index rose by 0.71%.

In corporate news, Sage rallied in London after it posted a jump in organic revenue for the first quarter.

Royal Bank of Scotland was on the back foot after the bank announced a large clean-up in the fourth quarter, including £500m of PPI provisions, $2.2bn for US residential mortgage-backed securities probes and £4.2bn for its pension fund.

Rio Tinto managed a higher close after saying it has agreed to sell its Mount Pleasant thermal coal project in Australia for an initial $83m rising to $224m (£156m) plus future royalties.

Shares in drug maker Novartis were under pressure after its fourth quarter earnings missed analysts’ expectations.

BASF was also in the red after the chemicals maker posted weaker-than-expected full year profits.

Chip designers ARM Holdings and Dialog Semiconductor were both under the cosh following disappointing results from Apple late on Tuesday.

Data released earlier showed German consumer confidence looked set to steady in February.

Market research group GfK’s forward-looking consumer sentiment indicator was flat in February compared with the previous month at 9.4, a touch ahead of economists’ expectations for a nudge down to 9.3.

“Despite a number of risks, including the threat of terrorist attacks and the refugee crisis, consumers still believe that the German economy will continue to grow modestly in the next few months,” GfK said.

All eyes will be on the Fed later. Although no change to interest rates is expected, investors will be looking to the statement for any further clues on monetary policy.

“It will be interesting to see just how much of an impact the uncertainty surrounding the Chinese economy, 'crashing' oil prices and the decline in share prices since the beginning of the year have on the Fed's decision making process,” said Markus Huber, senior analyst at Peregrine & Black.