Financial markets were cautious on Wednesday as investors waited to see if the Federal Reserve might announce it is trimming its massive stimulus programme.
European shares tiptoed higher, helped by a strong German business sentiment survey, but it was little more than fine tuning ahead of the Fed's statement. Moves in the dollar and benchmark U.S. and European government bonds were also tight. The debate over when the Fed will begin to halt the flow of cheap dollars has dominated trading worldwide for months amid worries it could trigger a turbulent reaction from investors who have become all too used to the support.
A majority of economists polled by Reuters expect the Fed to wait until March before it starts the process, but recent encouraging data from the U.S. and other parts of the world have raised the odds of a move in January, if not now.
"Probably the strongest encouragement for tapering to begin this evening is the stability in financial markets," said Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ.
"Our hunch is that a taper announcement may well encourage a year-end rally in global equity markets as an element of policy uncertainty is cleared," he said, adding the dollar should also do well against the yen.
Another Japanese trade deficit and expectations that Prime Minister Shinzo Abe could hint at fresh stimulus in a speech later was already tugging at the yen.
There was also no shortage of European distractions to fill the wait for the Fed.
Euro zone watchers had details thrashed out overnight on the bloc's new bank rescue mechanism to pick through, while German Ifo data showed business morale in Europe's biggest economy hit its highest level this month since April 2012, a sign that economic growth could accelerate next year.
Bank of England meeting minutes due at 0930 GMT were also on tap.
The pan-regional FTSE urofirst 300 extended gains to 0.8 percent after the German data. London's FTSE, Paris's CAC 40 and Frankfurt's Dax all made ground although the moves only reversed Tuesday's falls.
The euro was steady at $1.3767, having risen 0.2 percent in the previous two sessions. The common currency touched a six-week high of $1.3811 on December 11.
Source: reuters
