FRANKFURT: European shares fell marginally on Wednesday, a day after robust gains on Germany’s approval for a massive spending surge, while focus shifted to the US Federal Reserve’s interest rate decision. The pan-European STOXX 600 was down 0.1%, as of 0931 GMT, after rising for the three previous sessions, while Germany’s blue-chip index fell 0.3%.
German equities had jumped on Tuesday after the country’s parliament approved plans for a massive spending surge to revive economic growth and scale up military spending.
The European aerospace and defence index, the beneficiary of higher defence spending prospects, rose 0.4% to a fresh record. Long-term growth prospects from Germany’s fiscal reforms also enabled Barclays to raise its year-end target for the STOXX 600 index. Meanwhile, the Fed is widely expected to keep rates on hold later in the day. However, the spotlight will be on policymakers’ remarks about the ramifications of an ongoing trade war on its growth outlook.
“If they would indeed adjust inflation and economic growth expectations, then that could be seen by the markets as a confirmation that the Fed is worrying about the developments regarding trade and economic policies of the current Trump administration,” said Teeuwe Mevissen, senior market economist at Rabobank. Moreover, the Bank of England is also likely to keep interest rates on hold on Thursday. Basic resources led losses among sectors on Wednesday, falling 1.1%, followed by the real estate index, which lost 0.6%.
On the flipside, the oil and gas index rose 0.3%. Fuelling slight optimism were the hopes of a permanent ceasefire in Ukraine, as Russian President Vladimir Putin agreed to stop attacking Ukrainian energy facilities temporarily on Tuesday.
However, Putin declined to endorse a full 30-day ceasefire proposed by US President Donald Trump. Developments from Turkey were also keenly monitored after authorities detained President Tayyip Erdogan’s main political rival on charges including corruption and aiding a terrorist group, in what the main opposition party called “a coup against our next president”.
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