UK stocks : FTSEurofirst 300 down 0.6 pct
contracted in the fourth quarter, suffering its first decline since the recession ended more than three years ago.
"We do not expect a recession, i.e. another quarter with falling GDP, but a strong rebound also looks unlikely in our view," Joost van Leenders, investment specialist for allocation & strategy at BNP Paribas Investment Partners.
He added concerns about the U.S. economy, exacerbated by the forthcoming debt ceiling negotiations, and disappointments on the earnings front could usher in a fall of up to 10 percent on European indexes.
While much of the fall was seen as due to temporary factors, the report would likely provide ammunition for officials at the U.S. Federal Reserve to stay on their ultra-accommodative policy stance, which has helped fuel a 27 rally in the Euro STOXX 50 since June.
As a two-day policy meeting draws to an end, the Fed's Federal Open Market Committee was not expected to signal an early end to its quantitative easing programme, keeping its printing presses working at full speed as policy-makers in Washington prepare for new fiscal negotiations next month.
"(The Fed's chairman Ben) Bernanke has been worried about the fiscal cliff and I think he's not going to do anything until that danger is lifted," Alistair Winter, investment strategist at Daniel Stewart, said.
Traders cited continued money printing from the Federal Reserve as a key factor helping lift the euro and keep European equities near 2-year highs.
Societe Generale added the meeting ending on Wednesday could show the Fed's Federal Open Market Committee would take an
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