- FOMC begins policy meeting
- US inflation to be released
- Eurozone inflation rises, UK falls
- German economic confidence improves
- Merkel wins third term as Chancellor
FTSE 100: -0.34%
CAC 40: -0.86%
FTSE MIB: -0.32%
IBEX 35: -0.15%
Stoxx 600: -0.36%
European markets edged lower as traders turned nervous ahead of the start of the Federal Reserve's two-day policy meeting later today.
The Federal Open Market Committee (FOMC) may decide to reduce its monthly $85bn bond buying programme when it wraps up its meeting tomorrow.
A recent batch of positive economic data has fuelled concerns that the US central bank may announce tapering.
"Investors appear split on this at the moment, with some pointing to the significant improvement in the data and others warning about the low levels of inflation," said Alpari analyst Craig Erlam.
"What this means for the markets is that there's plenty of scope for significant moves whatever the FOMC decides to do. This uncertainty among investors is what's likely to contribute to the caution among investors over the next couple of days."
Acting as a backdrop will be the release of US inflation figures this afternoon which is expected to rise to 1.3% in November from 1% the prior month, according to consensus.
Chief Market Analyst Michael Hewson from CMC Markets said many are hoping that below-par inflation in the States will see the Fed refrain from scaling back monetary stimulus when the two-day meeting wraps up tomorrow.
"This is why today's US consumer price index numbers could well be instructive in that regard with expectations that the November numbers could well see a rise from 1% to 1.3% on an annualised basis," he said.
Eurozone inflation climbs
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, on the other hand, inflation fell unexpectedly to a four-year of low 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 wins third term 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 the coalition with Merkel's centre-right Christian Democratic Union party following lengthy talks.
Elsewhere 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.
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.
Orange slumped after saying it will not sign a deal with Iliad to share its 4G network.
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.
The euro fell 0.02% to $1.3758.
Brent crude futures dropped $0.672 to $108.680 per barrel, ICE data showed.