Europe midday: Stocks rise in choppy trade as FOMC decision looms

European stocks rose in choppy trade as investors bet that the Federal Reserve will raise interest rates.

At midday, the benchmark Stoxx Europe 600, France’s CAC 40 and Germany’s DAX were up 0.7%.

If the Federal Reserve goes ahead and raises rates as widely expected, it will be the first major central bank to do so since the financial crisis of 2008.

“The FOMC’s intentions have been telegraphed for a while now and a hike is an almost certain outcome,” said Societe Generale.

“We expect the FOMC to emphasise that the subsequent hikes will be data dependent and gradual. Chair Yellen is likely to tie gradualism to both cyclical and the slow-moving structural forces, namely low inflation and a low neutral real rate. Reinforcing this message, we also expect the FOMC’s estimate of the longer-run fed funds rate to decline from 3.5% to 3.25%.”

SocGen said efforts will especially be placed on communication this time around, as the Fed will need to carefully harmonise market expectations with its own forecasts.

“As we saw with the ECB, it is easy to disappoint, so the communiqué, press conference, and Summary of Economic Projections will have a key role to play,” the bank said, adding that it expects Yellen to strike the right balance.

In corporate news, Casino surged after the French supermarket operator announced debt-reduction plans. As part of the plans, the company will sell some of its real estate in Thailand and Colombia, as it looks to reduce debt by more than €2bn next year.

Elsewhere, educational publisher Pearson was in the black after Exane upped its stance on the stock to ‘outperform’ from ‘neutral’, but miner Anglo American slid after Societe Generale downgraded it to ‘sell’ from ‘hold’, saying things could get worse before they get better.

On the macroeconomic front, investors digested a couple of data releases.

Markit’s survey of manufacturing in the Eurozone showed activity rose to a 20-month high in December.

The flash services PMI activity index fell to 53.9 from 54.2, which was a three-month low, but the manufacturing PMI rose to a 20-month high of 53.1 from 52.8 in November.

Markit’s flash Eurozone PMI composite output index slipped to 54.0 in December from 54.2 the previous month, marking a two-month low but still well above the 50 threshold that separate expansion from contraction.

The flash Eurozone manufacturing PMI output index nudged up to 54.4 from 54.

Chris Williamson, chief economist at Markit, said: “The Eurozone economy enjoyed a comfortably solid end to 2015, though policymakers are likely to remain disappointed by the relatively modest pace of expansion and lack of inflationary pressures, given the stage of the recovery and the amount of stimulus already in place.

Elsewhere, the final reading on Eurozone inflation for November revealed consumer prices rose 0.2% in November, up from an initial estimate of 0.1%.