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17 Mar 2021 | 11:13

Europe midday: Shares tread water ahead of Fed meeting; BMW powers ahead

(Sharecast News) - European stocks were still treading water at lunchtime on Wednesday as investors took a cautious view ahead of the US Federal Reserve's policy decision later in the day. The pan-European STOXX 600 index had extended morning losses to be down 0.54%. All major regional bourses were lower.

"The Fed seems content to keep monetary policy ultra-loose in its attempts to let the economy run hot as it recovers from the effects of the pandemic. Fixed-income markets have become a little more nervous, but equity markets seem happy about it so far," said AJ Bell investment director Russ Mould.

"Markets will therefore want to know what any upgrades to US economic expectations mean for monetary policy and when interest rates might go up. Policy changes aren't expected at this meeting, but the Fed's comments will be closely watched for any clues as to what it might do over the next two years."

The rising cost of borrowing has been a growing concern for investors on fears that higher inflation will hinder the economic recovery from the pandemic. The U.S. central bank's policy statement and economic forecasts are due at 1800 GMT.

In equity news, shares in BMW outperformed after the car maker said it expected a significant year-on-year increase in group pre-tax profit in 2021.

BT and Vodafone were among the top performers after the UK government auctioned a new tranche of 5G mobile network spectrum for £1.36bn.Engine maker Rolls-Royce was a high riser after an upgrade to 'neutral' from 'underweight' by JPMorgan Cazenove.

Outsourcer Capita gained after announcing it was simplifying its business into three divisions from six, as it posted a decline in full-year pre-tax profit after taking a hit from the pandemic.

On the downside, shopping centre owner Hammerson slumped, having risen sharply a day earlier after saying it was looking to convert a former flagship Debenhams in Leicester into housing.

Upper Crust owner SSP fell after saying it was looking to raise £475m via a rights issue as it anticipated slower recovery from the impact of the pandemic on the travel industry, while Trainline was weaker after a downgrade at Panmure.

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