- The Washington Times - Wednesday, March 18, 2009

LONDON (AP) - Most stock markets rose modestly Wednesday ahead of an announcement from the U.S. Federal Reserve, which is expected to leave interest rates unchanged but also say how far it intends to boost credit markets with cash injections.

By noon in mainland Europe, Britain’s FTSE 100 was down 0.1 percent at 3,852.68, Germany’s DAX added 1.1 percent at 4,029.98, and France’s CAC 40 climbed 0.7 percent to 2,786.16.

U.S. stock index futures pointed to a lower open on Wall Street ahead of the conclusion of the Fed’s interest rate committee meeting.

As the central bank is expected to leave rates at their current historic low, investors will focus on how the Fed intends to spend funds to get credit flowing to the economy once again. It could do so by buying assets from banks to help them recapitalize.

“The burning question is whether the Fed will announce that it will move to buying U.S. Treasuries outright. In our opinion Treasury purchases are not likely,” said Stuart Bennett, senior forex strategist at Calyon in London.

Dow futures were down 0.6 percent to 7,312, while Standard & Poor’s 500 futures lost 0.6 percent at 771.40.

Europe was lifted somewhat by financial stocks. Shares in Unicredit SpA jumped 12 percent in Milan after Italy’s largest bank said it may seek as much as euro4 billion ($5.18 billion) in state aid but reported a 57 percent drop in fourth quarter profits, due mostly to trading losses in the global economic meltdown.

Trading on the FTSE 100 was fairly flat after British jobs data showed the number of unemployment in Britain rose to 6.5 percent in the three months ending in January, with the number of people out of work reaching its highest in 12 years.

“The jobs data is kind of a lagging indicator and markets have already priced in how deep this recession is going to be,” said David Hussey, London-based head of European equities with MFC Global Investment Management.

“The DAX has recovered a bit because it’s a more cyclical market, but generally we have seen a reasonable move in European markets and that looks set to continue in the short term. People are assuming a bit more risk in their portfolios,” he added.

In Asia, Hong Kong’s Hang Seng index led the region, gaining 239.08 points, or 1.9 percent, to 13,117.17, while Tokyo’s benchmark Nikkei 225 stock average added 23.04 points, or 0.3 percent, to 7,972.17.

The Japanese central bank said it was increasing its purchase of government bonds to keep ample cash in the monetary system following a two-day meeting where it also decided to keep its key interest rate at 0.1 percent. The Bank of Japan said it was considering providing loans to commercial banks as a way to shore up their capital bases.

“Investors took heart from the bank’s moves. The Bank of Japan is not sitting still. It is taking action aggressively to ensure the smooth liquidity in the financial market,” said Masatoshi Sato, a strategist at Mizuho Investors Securities Co. Ltd.

South Korea’s Kospi rose 0.5 percent to 1,169.95, while Shanghai’s benchmark Composite Index added 0.2 percent to 2,223.73.

Australia’s benchmark S&P;/ASX 200 dipped 0.2 percent after miner Rio Tinto dropped 8.7 percent on worries over its deal with Aluminum Corp. of China.

Wall Street got a surprise boost Tuesday _ posting its fifth gain in six trading sessions _ from a government report that home construction picked up in February. The news, which was unexpected, injected new vitality into a week-old rally. The Dow Jones industrial average jumped 179 points, or 2.5 percent, to 7,395.70. The Standard & Poor’s 500 index climbed more than 3 percent.

Asian markets had also advanced strongly in recent sessions on signs of improvement among major U.S. and European banks. But many analysts are cautious and believe the rally has run its course for now.

“The rebound has almost reached its limit,” said Castor Pang, an analyst at Sun Hung Kai Financial in Hang Seng, noting that turnover in most markets is not rising quickly enough to suggest a recovery.

The World Bank cut its forecast of China’s 2009 growth from 7.5 percent to 6.5 percent due to plunging exports. But World Bank economists expressed confidence in Beijing’s ability to keep the world’s third-largest economy expanding amid global turmoil.

“We see China as a relative bright spot in a rather gloomy global economic picture,” said David Dollar, the bank’s country director for China.

Oil prices fell in European trading, with benchmark crude for April delivery falling 68 cents to $48.48 a barrel on the New York Mercantile Exchange.

___

AP business writers Elaine Kurtenbach in Shanghai and Joe McDonald in Beijing, Associated Press Writer Shino Yuasa in Tokyo and Associated Press researcher Ji Chen in Shanghai contributed to this report.

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