Europe stocks slide before Fed decision

European stock markets mostly fell yesterday as dealers waited to see whether the Federal Reserve would decide measures to stimulate the US economy at a monetary policy meeting. London’s benchmark FTSE 100 index bucked the trend to close up 0.65% at 5,819.92 points. But in Frankfurt, the DAX 30 slid 0.45% to 7,310.32 points, while in Paris the CAC 40 dropped 1.18% to 3,502.09 points. Milan fell 1.07% and Madrid shed 0.70%. Company news was dominated by a possible tie- between British arms manufacturer BAE Systems and European aerospace giant EADS which controls Airbus. After shooting higher Wednesday on the announcement, BAE shares slumped 6.44 pence to 340.2 pence yesterday trading as scepticism about the attractiveness and feasibility of a merger of the two politically sensitive companies. In Paris, EADS shares plunged 10.20% to €25.15. The two giants revealed they were in talks to create a global aerospace and defence leader that would better rival US giant Boeing. They envisaged BAE owning 40% of the enlarged group, with EADS holding a majority 60-percent stake. In foreign exchange deals, the euro edged up to $1.2909 from $1.2899 late in New York on Wednesday, when the European single currency went above $1.29 for the first time for four months. “Today (Thursday) sees the finale in the series of major events that have dominated over the past two weeks,” said Chris Beauchamp, market analyst IG Index trading group. “The Fed will announce its latest policy decision, with many still expecting a burst of stimulus from (chairman) Ben Bernanke. “What we are likely to see is an extension to the period of ultra-low interest rates, but we would need to see something fairly impressive if the Fed is to avoid creating a wave of disappointment. The US central bank was due to conclude its two-day meeting later yesterday and most economists have predicted a third round of Fed bond-buying, or quantitative easing (QE3), to spur domestic growth. US markets drifted up ahead of the decision, with the Dow Jones Industrial Average adding 0.32% to 13,366.18 points in midday trade. The S&P 500-stock index added 0.15% to 1,438.74 points, while the tech-rich Nasdaq gained 0.19% to 3,120.32 points. Eurozone borrowing costs remained stable after a key decision by Germany on Wednesday that clears the way for a new firewall and debt brakes, clearing a hurdle in solving the debt crisis. On the secondary market, Italy’s 10-year borrowing cost dipped to 5.013% from 5.029 on Wednesday, while for Spain it edged up to 5.629% from 5.627%. In an auction of medium- and long-term debt yesterday, Italy raised €6.5bn at lower rates. From gulf times.