UPDATE 2-European shares slip ahead of Fed outcome; BMW races higher

  • Reuters
  • Stock Market News
UPDATE 2-European shares slip ahead of Fed outcome; BMW races higher
Credit: © Reuters.

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* STOXX 600 hovers below 1-year peak

* BMW jumps after forecasting strong 2021

* Miners, utilities stocks lead the decline

(Adds comments, updates prices throughout)

By Sruthi Shankar and Shreyashi Sanyal

March 17 (Reuters) - European stocks dropped on Wednesday, with most investors on the sidelines ahead of the U.S. Federal Reserve's policy decision, while BMW shares jumped after the German carmaker forecast significant profit growth in 2021.

The pan-European STOXX 600 index .STOXX fell 0.5%, trading below a one-year peak, with the utilities .SX6P and basic resources .SXPP sectors leading declines.

The Fed's policy stance will be watched after a recent run-up in Treasury yields stoked investor concerns about inflation picking up as the U.S. economy rebounds from the pandemic. The central bank's policy statement and economic forecasts are due at 2 p.m. EDT (1800 GMT).

"Investors prefer to stand on the sidelines ahead of one of the most anticipated FOMC meetings in the past few quarters," said Milan Cutkovic, market analyst at Axi.

"Fed Chair Powell will have a difficult time convincing markets that a rising inflation rate is not cause for concern, and that a rate hike is still at least two years away."

A move into some cheaply valued sectors such as banks and energy has pushed European stocks closer to record levels hit last year, with investors counting on vaccination drives and stimulus measures to spur a strong global rebound this year.

BMW BMWG.DE rose 6.2% after it forecast a significant annual increase in pre-tax profit in 2021 with strong performance in all segments. automobiles & parts index .SXAP gained 3.3% to hit a 2018 high, with Volkswagen VOWG_p.DE jumping 11.0% after it forecast 2021 deliveries, sales and earnings to exceed the previous year's level. airport operator Fraport FRAG.DE added 0.6% after HSBC upgraded the stock to "buy", saying the pandemic has forced the company to become "better". hydropower producer Verbund VERB.VI slid 7.9% as it expects 2021 profit to fall after a 14% rise in 2020, thanks to lower electricity prices.

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