Europe open: Equities slip as investors tread carefully before FOMC announcement

European stocks fell in early trade as investors erred on the side of caution ahead of Wednesday’s rate announcement by the Federal Reserve.

At 0840 GMT, the benchmark Stoxx Europe 600 index was down 0.5%, while Germany’s DAX and France’s CAC were both 0.6% weaker.

“European equities are trading moderately lower this morning ahead of a crucial three days filled with plenty of economic and corporate data which most likely will determine if the recent rally can be sustained and still has legs or if markets will enter into reverse mode,” said Markus Huber, senior analyst at Peregrine & Black.

“Focus today will be on US corporate earnings with heavyweights like Merck, Pfizer, Ford and Apple all reporting. Tomorrow centre stage will take the FOMC meeting. While nobody expects a change in interest rates at this meeting, many are hoping that the Fed will clarify a bit more where they are stand in regard to possibly hiking rates in December especially as economic data of late has been fairly disappointing and shown some occasional weakness.”

On Thursday, all eyes will be on the release of third-quarter US GDP data. A weak reading would most likely put an end to any rate hike speculation for quite a while to come, said Huber.

On the corporate front, shares in chemicals group BASF fell after its cut its full-year earnings guidance on the back of weak sales in China, Brazil and other emerging markets.

Novartis was also in the red after the Swiss drug maker posted a 42% drop in third-quarter profit from the same period last year.

Oil giant BP bucked the trend. Although it posted a sharp fall in third-quarter underlying replacement cost profit to $1.82bn from $3.03bn the previous year, the results were better than expected.

Still to come on the data calendar, US durable goods orders are at 1230 GMT, S&P Case/Shiller home prices are at 1300 GMT and US consumer confidence is at 1400 GMT.