European stocks bounce as markets eye Fed

European stocks closed higher on Wednesday after a rocky start to the week as markets await the conclusion of a two-day meeting of the U.S. Federal Reserve.

The pan-European STOXX 600 ended Wednesday 1.12 percent, with all the major sectors in the green.


European markets have pent the day in the green ahead of the conclusion of the U.S. Federal Open Market Committee's (FOMC) policy meeting which began on Tuesday.

Expectations are for the bank to stand pat on interest rates following gloomy jobs data and rising concerns over a Brexit should the U.K. vote to leave the European Union (EU) in a referendum on June 23. The FOMC is expected to wind down its two-day meeting with a 2 p.m. ET (7pm London time) statement that sheds no light on the timing of its intended interest rate hike.

The positive mood was also felt in the U.S. with the Dow Jones Industrial Index up 0.21 percent and the broader S&P 500 rising some 0.18 percent.

Meanwhile in Asia, the Bank of Japan (BOJ) is also scheduled to hold a two-day policy meeting starting on Wednesday. Chinese mainland markets rose Wednesday, shrugging off a decision by stock index provider MSCI on Tuesday to delay inclusion of mainland-traded Chinese A-shares in its key emerging market index.

Most other Asian markets also reversed morning losses, despite continued jitters over the possibility the U.K. may opt to exit the EU as well as concerns over the outcomes of the Fed and BOJ meetings.

Investors are also looking ahead to the Bank of England meeting on Thursday where the central bank is expected to make no move on the interest rate. On Wednesday, the number of jobless people in the U.K. fell by 20,000 in the three months to April while the unemployment rate stood at 5 percent, the lowest since 2005.

Zara owner higher

The retail sector was in focus for investors. Inditex, the owner of Zara, reported a 6 percent rise in first-quarter net profit helping push shares higher.

Sweden's H&M said sales in May rose 9 percent year-on-year, slightly below market expectations. Nonetheless shares were trading higher.

And in a trading statement, luxury footwear maker Jimmy Choo said it had made a good start to the year, sending shares sharply into positive territory.

UK housebuilders stumble

Elsewhere, Zodiac Aerospace ended the day 12 percent higher after reaffirming its financial targets for the 2015/2016 fiscal year and after JPMorgan raised its price target for the stock.

And U.K. housebuilder Berkeley Group warned that housing reservations over the five months to May are down 20 percent "on reduced new launches in run-up to EU Referendum". The comments sent shares in the firm lower and dragged other British housebuilders, including Taylor Wimpey, lower.

Shares in British software maker Aveva Group tanked as much as 18 percent after it said talks with Schneider Electric for a potential reverse takeover had ended. Schneider Electric shares were in the black. It ended the day down 12.7 percent.

Miners, banks bounce

Basic resource stocks rebounded sharply on Wednesday as the dollar slipped slightly ahead of the Fed meeting. A weaker dollar supports dollar-denominated commodities such as copper and this helped mining stocks rally.

And the banks, which had been hammered at the start of the week, were trading higher. Concerns over the health of European banks has been reignited, particularly in Italy where lenders have large non-performing loan portfolios.

Low government bond yields, particular in Germany where the 10-year bund yield fell below zero for the first time this week, has added to concerns.

Spain's Banco Popular said on Wednesday that its 2.5 billion euro rights issue announced last month is progressing well and the bank has seen high interest from both institutional and retail investors. Shares closed 5 percent higher.

Follow CNBC International on Twitter and Facebook.