Europe open: Equities drift lower as investors eye Fed announcement

European equities drifted a little lower in early trade as investors looked ahead to the latest policy announcement from the Federal Reserve.

At 0845 GMT, the benchmark Stoxx Europe 600 index was down 0.3%, Germany’s DAX was off 0.1% and France’s CAC 40 was 0.4% weaker.

Meanwhile, oil prices retreated after the American Petroleum Institute said late on Tuesday that in the week ended 9 December, there was a 4.68m barrel build in US crude inventory levels, versus a 1.5m draw expected.

West Texas Intermediate was down 1.2% to $52.35 a barrel and Brent crude was 1.1% lower at $55.14.

Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, said: “Although the market has priced in a US rate rise tonight with near certainty, European equities are slightly softer, as caution precedes the Federal Reserve statement and Janet Yellen's press conference.

“Market expectations firmly favour a 'dovish hike' today, with Janet Yellen expected to remain supportive of equity and corporate bond markets. However, with the prospect of additional fiscal stimulus from a Trump presidency from 2017 onwards, and the effects of higher oil prices on US inflation, there is clearly a risk that the Fed may begin pushing its future rate projections higher once again. This could come as an unwelcome move for markets, especially in their current complacent state.”

The FOMC rate announcement is due at 1900 GMT, with a 25 basis points rate hike expected.

In corporate news, Swiss biotech group Actelion was under the cosh after Johnson & Johnson ended talks with the company about a potential deal.

Italian broadcaster Mediaset rallied after Fininvest and Vivendi both upped their stakes in the company.

Dixons Carphone fell despite reporting a bigger-than-expected jump in first-half profits and upping its dividend

Software product group Micro Focus International was in the black after reporting a rise in revenue and pre-tax profit for the first half.

Oil and gas services company Wood Group ticked down as it reaffirmed its full-year forecast for earnings before interest, taxes and amortisation but cautioned that market conditions are likely to remain challenging in 2017.

Eurozone industrial production is at 1000 GMT, while in the US, retail sales and industrial production are at 1330 GMT and 1415 GMT, respectively, while business inventories are at 1500 GMT.