European shares rally ahead of Fed decision

Wed Dec 18, 2013 11:01am EST

* FTSEurofirst 300 up 0.9 pct, Euro STOXX 50 up 1 pct

* Some strategists reckon Fed will leave stimulus intact

* Robust German business morale data helps sentiment

* Endesa boosted by dividend resumption

By Tricia Wright

LONDON, Dec 18 (Reuters) - European shares advanced on Wednesday, more than recouping the previous session's losses, as investors positioned for the conclusion of a two-day U.S. Federal Reserve policy meeting.

Shares have been weakening over the past two weeks on concern the Fed will begin scaling back its equity-friendly stimulus measures in December.

But a majority of economists expect it to hold off undertaking the process until March, while strategists highlight that persistently low inflation could prevent a December taper.

"I think if it does not do anything as I expect... that the markets may take a positive cue from that and we will have some sort of end-of-year rally," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

Mic Mills, head of operations at TradeNext, reckons a decision not to taper now could trigger a knee-jerk rise of nearly 2 percent on the Euro STOXX 50 to its 50-day moving average, now at 3,023.

The FTSEurofirst 300 was up 0.9 percent at 1,259.50 points by 1556 GMT, albeit in light volume, with some investors reluctant to become too committed before hearing the Fed's intentions later in the day.

The euro zone's blue-chip Euro STOXX 50 was 1 percent higher at 2,971.20.

Helping the mood, German business morale hit its highest level since April 2012 in December, the think tank Ifo reported. This was in line with expectations, but another sign that growth in Europe's largest economy may accelerate next year.

Endesa topped the FTSEurofirst 300 with a 6.6 percent advance as the Spanish power firm said it would pay a dividend on this year's profit, which would give it one of the highest yields in Europe.

Volume on the stock stood at four times its full-day average for the past three months, against half for the FTSEurofirst 300.

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