World markets await key Fed statement

LONDON — European stock markets rose modestly Wednesday following gains in Asia as investors looked for direction from the U.S. Federal Reserve’s policy statement due later in the day.

In Europe, the FTSE 100 index of leading British shares was up 8.01 points, or 0.2 percent, at 4,238.03 while Germany’s DAX rose 38.27 points, or 0.8 percent, to 4,745.42. The CAC-40 in France was 15.17 points, or 0.5 percent, higher at 3,132.

Wall Street was also expected to open steady after a pretty flat performance on Tuesday. Dow futures were 36 points, or 0.4 percent, higher at 8,293 while the broader Standard & Poor’s 500 index rose 3.8 points, or 0.4 percent, to 894.

Investors around the world have been in jittery mood of late amid gnawing concerns that the market rally over the last three months was not justified by economic data.

In light of the current uncertainty, investors will be closely watching the statement from the Fed. Though the Fed is widely expected to keep its benchmark interest rate in the range of zero to 0.25 percent, investors will be focusing on what it says about economic prospects and how long it expects to keep monetary policy as accommodating as it is.

Most analysts think the Fed has a difficult balancing act — expressing the view that the worst of the recession is over at the same time as not spooking investors into thinking that interest rates will rise any time soon.

“Many traders are in a cautious mood as they await news from tonight’s Fed rate setting meeting whilst the fundamentals in general remain relatively thin on the ground,” said Matt Buckland, a dealer at CMC Markets.

Equities rallied from the middle of March until June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated. As a result, many investors saw valuations around the world as particularly cheap and started buying into the market.

However, a run of underwhelming economic news, culminating in Monday’s warning from the World Bank that the global economic downturn in 2009 will be bigger than it previously thought, brought an abrupt end to the rally and altered the general mood prevailing in the markets.

“Though markets get teased every other day with little nuggets of hope, the level of cynicism which prevails quickly dissipates any positive benefit,” said David Buik, markets analyst at BGC Partners in London.

That fairly split view was evident in an economic outlook from a leading international economic body.

The Organization for Economic Cooperation and Development said the recession is close to bottoming but that recovery will be weak unless governments take further action to remove uncertainty over banks’ balance sheets.

The OECD expects the combined GDP of its industrialized member countries to shrink 4.1 percent this year, which is nevertheless its first upward revision in two years. In March it had predicted a 4.3 percent contraction.

Earlier in Asia, Japan’s benchmark Nikkei 225 stock average rose 40.71 points, or 0.4 percent, to 9,590.32 after falling nearly 3 percent Tuesday, even as new figures showed the export-dependent country’s trade continued to sag.

Hong Kong’s Hang Seng rose 353.78 points, or 2 percent, to 17,892.15

South Korea’s Kospi was up 0.2 percent while Australia’s benchmark gained 0.3 percent. Taiwan’s index jumped 3 percent and Singapore’s market rose 2.4 percent.

Oil prices fell below $69 a barrel, partially reversing gains sparked by a weakening U.S. dollar. Benchmark crude for August delivery was down 34 cents to $68.902. The contract gained $1.74 overnight.

The dollar fell 0.1 percent to 95.19 yen while the euro rose 0.1 percent to $1.4082.

____

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.