* FTSEurofirst 300 index gains 0.25 percent
* Focus on Federal Reserve meeting, forward guidance
* BMW surges on profit outlook, boosts auto sector
By Atul Prakash
LONDON, March 19 European shares edged higher in
cautious trading ahead of an expected announcement of a further
cut in U.S. monetary stimulus on Wednesday, with BMW leading
auto stocks higher after delivering a bullish profit outlook.
The STOXX Europe 600 Automobile and Auto-parts index
climbed 1.6 percent, the top sectoral gainer in Europe, helped
by a 7.3 percent jump in BMW shares after the owner of
the Mini, Rolls-Royce and BMW brands said it expected record car
sales and a rise in pretax profit in 2014.
A rally in automobile stocks helped European shares to post
slight gains, despite continuing nervousness over the situation
in Crimea. The pan-European FTSEurofirst 300 index was
up 0.25 percent at 1,309.4 points by 1208 GMT, extending gains
in the previous two sessions.
However, investors avoided stronger bets ahead of the Fed
meeting. Analysts said a further cut in the Fed's monthly bond
purchases by $5 billion was largely factored in, but the market
would look for hints about the speed of future cuts and whether
the central bank provides new qualitative guidance on when it
might eventually raise interest rates.
"There is always some nervousness ahead of the Fed meeting.
We expect the tapering process to continue and there is likely
to be some guidance around the unemployment rate and future U.S.
rate rises, although we still don't expect the first rate hike
until July 2015," Barclays Wealth strategist Henk Potts said.
"The Fed continues to signal that the economy is in a better
shape, the recovery is ongoing and they are slowly going to
withdraw the stimulus from the system. Investors read that as a
long-term positive, rather than the short-term fears about what
the slow withdrawal of stimulus will mean for the markets."
An improving global economic outlook, and the U.S. central
bank's move to inject liquidity in the market by buying bonds,
had helped European stocks to record an impressive gain of 16
percent last year and pushed the FTSEurofirst 300 to a
5-1/2-year high this year, but the Fed support is waning.
"It's still going to be a big announcement," said Lorne
Baring, managing director of B Capital Wealth Management.
"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."
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 remained fragile as Russian troops
and unarmed men stormed Ukraine's naval headquarters in the
Crimean port of Sevastopol. Ukraine's acting Defence Minister
Ihor Tenyukh said his country's forces would not withdraw from
Crimea, raising concerns of an armed conflict.
Among sharp movers, global clothing group Inditex
rose 3.8 percent 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
On the other hand, British engineer Smiths Group
dropped 5.9 percent, the biggest faller on the pan-European
index. Its first-half profit fell 3 percent due to pricing
pressure in its second largest unit and a strong pound.
Europe bourses in 2014: link.reuters.com/pad95v
Asset performance in 2014: link.reuters.com/rav46v
Today's European research round-up
(Editing by Mark Trevelyan)