European shares steady, focus on Fed policy meeting

Wed Mar 19, 2014 5:06am EDT

* FTSEurofirst 300 index steadies in morning trading

* Focus on Federal Reserve meeting, forward guidance

* Inditex gains, Smiths Group slips after updates

By Atul Prakash

LONDON, March 19 (Reuters) - European shares steadied on Wednesday, with focus shifting to the U.S. Federal Reserve's scheduled policy meeting that could announce further stimulus cuts and provide new guidance about the timing of rate rises.

Analysts said a further reduction in the Fed's monthly bond purchases by $5 billion was largely factored in, but investors would look for hints about the speed of future cuts and if the central bank provides a new qualitative guidance on when it might eventually raise interest rates.

"It's still going to be a big announcement," Lorne Baring, managing director of B Capital Wealth Management, said. "We expect no change in the policy in terms of action, but there might be hints about the speed of the withdrawal of monetary stimulus. The markets will move based on the language."

The U.S. central bank's move to inject liquidity in the market by buying bonds and improving global economic outlook had helped European stocks to record an impressive gain of 16 percent last year and pushed the FTSEurofirst 300 index to a 5-1/2-year high this year.

The pan-European index was flat at 1,305.81 points by 0855 GMT after rising in the previous two sessions.

This year's stocks rally has been hit by geopolitical tensions over Ukraine and signs of a slowdown in Chinese economic growth. The FTSEurofirst 300 fell 5.5 percent in one week from early March before recovering some lost ground.

European stocks witnessed a relief rally in the previous session after Russian President Vladimir Putin signed a treaty making Crimea part of Russia but said he did not plan to seize any other regions of Ukraine.

However, the situation in the region remained fragile. Ukraine's acting Defence Minister Ihor Tenyukh Ukrainian said his country's forces will not withdraw from Crimea, raising concerns of an armed conflict.

In the absence of a broader market catalyst, some individual shares moved sharply following their earnings updates.

Global clothing giant Inditex, owner of Zara rose 3.2 percent to the top of the FTSEurofirst 300 index after saying its early 2014 sales rose after low profit growth last year due to depreciating currencies outside the euro zone and the cost of refurbishing flagship stores.

On the other hand, British engineer Smiths Group fell 5.5 percent, the biggest faller on the pan-European index, as its first-half profit fell 3 percent due to pricing pressure in its second largest unit and a strong pound that reduced the U.S.-dominant manufacturer's margins.

Europe bourses in 2014: link.reuters.com/pad95v

Asset performance in 2014: link.reuters.com/rav46v

Today's European research round-up