Europe open: Stocks bounce back as FOMC decision looms

European stocks rose in early trade, bouncing back from losses in the previous session as investors looked to the start of the Federal Reserve’s two-day policy meeting.

At 0850 GMT, the benchmark Stoxx Europe 600 index was up 1.6%, France’s CAC 40 was 1.9% higher and Germany’s DAX was up 1.8%.

Stocks fell heavily on Monday, with energy-related shares in particular under the cosh as oil prices skidded.

Oil prices briefly recovered and although they were back in the red by early Tuesday, they were well off the lows seen the previous day, with West Texas Intermediate down 0.5% to $36.14 a barrel and Brent crude down 0.4% to $37.72.

Autos performed well as data from the European Automobile Manufacturers Association revealed a 13.7% increase in new car registrations in November, marking the 27th month of consecutive growth. The Stoxx 600 autos and parts index was up 2.6%.

Among individual stocks, BHP Billiton was a high riser after Credit Suisse upgraded its rating to ‘outperform’ from ‘neutral’.

Rio Tinto was also in the black after its Oyu Tolgoi expansion project received a boost when a syndicate of banks and international governments agreed $4.4bn (£2.9bn) in loans.

Shares in engineering software group Aveva tumbled after it announced that it had terminated takeover talks with Schneider Electric.

French pharmaceuticals company Sanofi rallied after announcing that it will swap some assets with Boehringer Ingelheim.

Faurecia was also on the front foot after the car parts group agreed to sell one of its division to Plastic Omnium.

Hennes & Mauritz edged higher despite posting weaker-than-expected November sales growth.

On the downside, though, Dialog Semiconductor fell sharply after the German chip maker cuts its revenue guidance.

Still to come on the data front, the German ZEW survey is at 1000 GMT.

“The recent improvement in economic data, helped by a lower euro and energy prices is expected to provide a boost to the latest German ZEW investor survey of economic expectations for December,” said CMC Markets analyst Michael Hewson.

“A note of caution is needed here, despite the improvement in the economic picture given that the DAX has slid sharply during the same period, which could well act as an anchor on this particular measure. An improvement is expected from 10 to 15.4, but given recent DAX weakness I wouldn’t rule out a downward surprise.”

In the US, CPI and Empire manufacturing are at 1330 GMT, while the NAHB housing market index is at 1500 GMT.

The big focus for the day is likely to be the US inflation data, which Societe Generale expects to show core inflation up to 2%.

“I can think of lots of reasons why that would be seen to justify a rate hike, and indeed several rate hikes,” said strategist Kit Juckes. “But I’m not sure the market will even pay much attention with eyes on oil prices, credit markets, and the Chinese renminbi.”