Fed expected to hold on mid-2015 rate hike, despite doubts
| London
The euro rose and shares slipped in聽Europe聽on Tuesday as mixed corporate earnings and concerns over聽Greece聽kept investors cautious ahead of a busy week which will include the first policy meeting of the U.S.聽Federal聽Reserve聽this year.
Russian markets were also jittery after a cut to the country's sovereign credit rating.
Investors will be keen to hear the Fed's response to the recent policy easing by global central banks such as the聽European Central Bank, whose long-awaited plan to buy bonds to revive the flagging euro-zone economy has propelled bond yields and the euro to multi-year lows and stocks to multi-year highs.
Although core bond yields held near those lows, lower-rated yields edged higher after聽Europe聽signaled it would not yield to a new聽Greek government's demands for debt forgiveness, though it showed a willingness to give聽Athensmore time to pay its debts. Top Greek shares were down 2.7 percent.
Credit markets were also jittery beyond the eurozone, with the cost of insuring exposure to聽Russia's debt up after Standard & Poor's cut聽Russia's sovereign credit rating to "junk" late on Monday, citing weakened economic growth prospects and Western sanctions.
"A lot of investors have been taken aback by the speed of macroeconomic adjustments," said聽Sean Darby, global equity strategist at Jefferies. "This is not the type of environment they like to invest in."
The pan-European聽FTSEurofirst 300聽equity index was down 0.2 percent. European heavyweights Philips and Siemens were among those reporting disappointing earnings or outlook statements, while in the聽U.S. Microsoft Corp聽reported a fall in quarterly profit.
"Today's earnings show that global demand remains the big issue. Companies can take advantage of low rates, they can buy back stock but they cannot create demand and they will get hurt by global currency wars," said聽Lex Van Dam, hedge-fund manager at聽Hampstead Capital.
Most Asian share markets firmed on Tuesday. The euro clung to rare gains, up 0.9 percent to trade at $1.13455, taking it further from an 11-year trough of $1.1098 hit on Monday.
Investors widely expect the Fed to acknowledge the uncertain global outlook and stick to its promise to be patient on tightening. Yet its timetable remains for lift-off on rates by mid-year, a trajectory that presages further broad-based gains for the dollar.
Japan's Nikkei gained 1.4 percent, while聽Australia's main index added 0.8 percent. Other moves were mostly modest and MSCI's broadest index of聽Asia-Pacific聽shares outside聽Japan聽was flat on the day.
Chinese markets continued their recent erratic path and the聽Shanghai聽index slipped 2.2 percent.
On Wall Street, the Dow had ended Monday up a bare 0.03 percent, while the S&P 500 gained 0.26 percent and the Nasdaq 0.29 percent.
A snow storm engulfing New York is expected to keep many investment banks and fund managers on skeleton staff, though the main exchanges all plan to open as usual on Tuesday.
In commodity markets, U.S. crude was quoted 17 cents lower at $44.97. Brent fell 21 cents to $47.95. (Reporting by Lionel Laurent; Additional reporting by John Geddie, Francesco Canepa, Jemima Kelly, Karin Strohecker; Editing by Gareth Jones)
