LONDON, June 20 (Reuters) – European shares extended theprevious session’s strong gains in choppy trading on Wednesday,led by cyclical stocks, with investors nervously waiting to seeif the US Federal Reserve announces further stimulus measuresto support the economy.
Some investors expect the central bank will extend itsbond buying programme, dubbed Operation Twist, in which it sellsbonds with maturities of three years or less and buys securitieswith maturities of six years and longer.
The programme, aimed at pushing down longer term interestrates to shield the still fragile US economy, expires thismonth.
Analysts said recent poor data raised hopes the Fed wouldadopt further monetary stimulus measures to support the economicrecovery, although some investors believed the central bankmight leave the policy unchanged today and announce a freshround of quantitative easing in its next meeting.
“Operation Twist is more likely than any measures in termsof printing new money or a further round of quantitative easing,but with bond yields as low as they are at the long end, we don’tsee that having much economic significance,” Gerard Lane,strategist at Shore Capital, said.
At 0919 GMT, the FTSEurofirst 300 index of topEuropean shares was up 0.1 percent at 1,010.52 points aftersurging 1.6 percent to a one month high in the previous session.
Graham Bishop, equity strategist at Exane BNP Paribas, saidshares could trim recent strong gains if the Fed failed toannounce any fresh measures, but the drop was seen limited asthere were plenty of investment opportunities.
DEFENSIVES SUFFER”But if we see some positive action from the Fed, that willbe the start of a wider move in equities.
It will signal thatthey are likely to do more in terms of quantitative easing,” hesaid and added: “Directionally, we are bullish on equities andsee a 15 percent upside potential by the year end.
Naomi Harris is a business journalist based in Darwin, Australia. Naomi has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Naomi spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.