- FOMC policy decision looms
- US CPI holds steady
- UK inflation falls, Eurozone rises
- Merkel wins third term as Chancellor
- German economic confidence improves
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European stocks declined as the Federal Reserve began its two-day policy meeting.
Markets showed caution ahead of the US central bank's announcement on whether it plans to begin scaling back its $85bn per month in bond purchases tomorrow when the meeting ends.
A slate of upbeat data pointing to recovery in the world's biggest economy and labour market has increased the likelihood of such a move.
Analysts at Bank of America Merrill Lynch said in a note to clients yesterday that while their base case is for a taper in March, market expectations for a December taper "have risen recently".
"Some have suggested that since the markets are 'ready', the Fed should, and will, taper. But the same arguments were made back in September, and Fed officials paid them no more heed back then," said Michael Hanson and Priya Misra.
Acting as a backdrop today, the Department of Labour revealed the consumer price index (CPI) held steady in November compared with the month before, surprising analysts who had expected a 0.1% rise. The core measure, which excludes volatile food and fuel prices, rose by 0.2%.
"We're not convinced that the low rate of inflation in November will prevent the Fed from announcing tomorrow that it will begin to taper its asset purchases, although the decision remains finely balanced," Capital Economics said.
Eurozone and UK inflation
Eurozone inflation rose to 0.9% in November from 0.7% in October due to an increase in electricity and accommodation prices.
However, wage growth continued to decelerate in the third quarter to the slowest pace in three years.
October's fall in inflation forced the European Central Bank to cut interest rates to a new record low of 0.25% last month.
In the UK, inflation fell unexpectedly to a four-year low of 2.1% in November from 2.2% the previous month, edging closer to the Bank of England's target of close to but under 2%.
Energy and food prices drove the drop in consumer inflation, which was partially offset by a rise in prices in transport, recreation and culture.
Merkel voted in as German Chancellor
Angela Merkel was elected to a third term as German Chancellor today after a vote in the lower house of parliament.
The vote paves the way for her "grand coalition" government to be sworn in and take the lead of Europe's biggest economy.
It comes after Social Democrats voted on Sunday to back a coalition with Merkel's centre-right Christian Democratic Union party following lengthy talks between the two.
Separately Merkel has reportedly recommended Bundesbank Vice President Sabine Lautenschlaeger to fill the seat on the ECB's executive board that will be vacated by Joerg Asmussen.
Also in Germany today, a report from ZEW showed economic confidence grew more than expected in December. The sentiment index rose to 62 this month from 54.6 in November, beating the forecast for a reading of 55.
BP plunged after the Financial Times reported that lawyers representing businesses seeking compensation for losses incurred from the 2010 Gulf of Mexico spill said the oil company attempted to mislead the court when it won an injunction earlier this month on payments to some claimants.
CGG retreated after the seismic surveyor of oilfields cut its 2013 profit forecast.
Boeing advanced after the plane-maker raised its quarterly dividend by 51% and authorised a $10bn share-repurchase plan.
Rexel declined following reports Ray Investment is selling a stake worth about €368.5m in the electrical goods distributor.
Zurich Insurance gained after appointing George Quinn from Swiss Re Ltd as its Chief Financial Officer. The insurer has been seeking a CFO since Pierre Wauthier committed suicide in August.
Dixons Retail slumped after saying it expects the second half of the year to be more challenging than the first half.
The euro fell 0.04% to $1.3755.
Brent crude futures dropped $0.764 to $108.580 per barrel, ICE data showed.