LONDON Aug 21 (Reuters) - European stocks were set to open flat to higher on Wednesday, taking their cue from gains on Wall Street and as a key index found technical support, although appetite for shares was sapped by expectations of an upcoming reduction in U.S. monetary stimulus.
Futures for the Euro STOXX 50, Britain's FTSE 100, Germany's DAX and France's CAC were between flat and 0.2 percent higher at 0625 GMT.
The euro zone's Euro STOXX 50 has shed 2.6 percent in the past week as the market started to factor in the increasing chance of a reduction to the Federal Reserve's equity-friendly asset purchase programme in light of stronger U.S. economic data and more hawkish comments from Fed's officials.
But the index closed off its intra-day low on Tuesday, echoing a rebound in U.S. equities and having found technical support at 2,769, the 23.6 percent retracement of the rally since late June.
"Despite yesterday's drop, the dynamic remains bullish from a short-term point of view," said Philippe Delabarre, an analyst at Paris-based technical analysis firm, Trading Central, noting the index is further supported by its August 7 bottom at 2,776 points.
"Therefore, as long as 2,715 is a support threshold (corresponding to the 38.2 percent Fibonacci retracement of the rise between June and August 16), our target is at least 2,887 points (the index's top in July 2011)."
After the European market close, traders will look closely at the minutes of the Fed's July policy meeting, due to be published at 1800 GMT, for clues as to when and by how much the central bank will cut its stimulus programme.
Bond buying schemes by the Fed and other major central banks have driven investors out of lower-yielding assets and into shares in the past year, helping the euro zone Euro STOXX 50 index rise roughly 27 percent since June 2012.
"Discussions on the impact and efficacy of the current (bond) ...purchases may offer hints on the size and composition of potential changes as the taper proceeds," Credit Agricole, which expects a $20 billion reduction to the Fed's $85 monthly security purchases, wrote in a note.
"We believe (Fed officials) wanted more information before making a decision but were predisposed to slow the flow of asset purchases sooner rather than later, barring a significant deterioration in the labor market outlook."
German Bund futures opened 9 ticks lower at 140.52, with investors wary of making big bets ahead of the release of Fed minutes later in the day. Germany will sell new two-year bonds on Wednesday, with analysts saying a recent rise in yields on the back of Fed tapering expectations should lure investors into the auction.
> Asia stocks slip anew, can't escape Fed fears > Wall St bounces to end four-day skid; retailers gain > Nikkei drops to 7-week lows as emerging market tension weighs > TREASURIES-Yields fall as buyers step in > Dollar hovers near 6-mth low vs euro, Fed minutes awaited > Gold inches up, awaits Fed minutes for clues on stimulus > Copper slips on caution ahead of Fed minutes > Brent crude slips under $110, eyes on Fed
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VESTAS WIND SYSTEMS
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