By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- European stocks declined Tuesday, with
investors facing uncertainty from the U.S. Federal Reserve's
outlook on interest rates and the implications for European
markets. Adding to the mix of unknowns was what lies ahead for the
U.K. after Scotland votes on the issue of independence on
Thursday.
Data: Concerns about weakening conditions in the German economy
-- the largest in Europe -- were underscored Tuesday after the
closely watched ZEW indicator of economic expectations posted a
larger-than-expected fall. The survey's indicator for current
conditions dropped to 25.4 in September from 44.3 in August. The
September reading missed expectations of 41.0 from a Wall Street
Journal poll of analysts.
Markets: European stocks overall held to losses after the ZEW
survey was released, with the Stoxx Europe 600 ending down 0.3% at
342.84. Germany's DAX 30 closed down 0.3% at 9,632.93.
The Fed is on the radar for global investors as the U.S. central
bank begins its two-day meeting, with policy makers expected to lay
the groundwork for eventually raising interest rates. Read: Eight
keys to the Fed's September meeting.
"It's very difficult for people to argue that the Fed's
ultra-loose monetary policy stance has not been largely responsible
for stocks rallying to their highest-ever levels," said Craig
Erlam, market analyst at Alpari, wrote Tuesday. "Now that this is
coming to an end, with asset purchases falling to zero next month
and the first interest-rate hike around the corner, people are
getting nervous." U.S. stock futures were lower on Tuesday.
Meanwhile, the Scottish independence referendum will be held
Thursday, with various polls indicating the vote on whether to
break away from the U.K. is too close to call. "If the Scots do
vote to exit, much may depend on how quickly they accept having a
freely floating exchange rate as the way forwards," said David
Owen, chief European financial economist at Jefferies. "Our central
case remains that Scotland will still vote to remain in the Union
(just), but analysis of the subject suggests that very little for
exit is priced into short sterling."
Stocks: Among individual movers, Orange SA shares fell 1.4%
after the French telecommunications company bid EUR3.33 billion
($4.31 billion) for Spanish broadband and cellphone operator
Jazztel SA. But shares of Jazztel popped up 6.3%, the best
performers on the Stoxx 600.
"[We] see limited likelihood of a counter offer for Jazztel from
any other player," said telecoms analysts at Espírito Santo
Investment Bank in a note to clients Tuesday. As well, they noted
that Jazztel's top management and main shareholder support the bid,
saying "the fact that the offer is fully paid in cash makes an
upwards revision of the price unlikely and therefore we believe
investors should take the offer."
In Paris, the CAC 40 shed 0.4% to 4,409.15. In London, the FTSE
100 fell 0.2% to 6,792.24, holding to losses after an unexpected
decline in inflation in August.
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