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European markets close lower ahead of Fed decision; euro hits 6-month high; Hexagon up 10%

  • European markets close lower ahead of the U.S. Federal Reserve rate decision
  • OPEC crude output rose to the highest level seen so far this year
  • Bundesbank President Jens Weidman said the ECB faces the risk of political pressure to maintain its stimulus program

European markets closed lower Wednesday as investors cautiously awaited the latest monetary decision by the U.S. Federal Reserve.

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The pan-European Stoxx 600 was 0.12 percent lower with major bourses and sectors mixed.

The German DAX closed higher after hitting a record high of 12,989.91 midday Wednesday. It rose 1.1 percent during Wednesday deals and closed the day up 0.48 percent. Elsewhere, in currencies, the euro rallied against the greenback to reach its highest level since the election of President Trump after the U.S. Labor Department released lower-than-expected CPI figures. Sterling, meanwhile, rose above $1.28 for the first time since UK election on the back of dollar weakness.

U.S. markets were mixed following the release, though the Dow Jones hit a record high of over 21,332.77 as technology stocks continued their recovery after a major sell-off earlier this week.

Tech stocks also led the gains back in Europe, with the sector trading up around 0.5 percent.

Basic resources stocks also moved higher following news that the Chinese firm Fosun is to offer more than £224.6 million ($287 million) for the London-listed miner Gemfields, Reuters reported. The stock was up by more than 13 percent.

Oil prices meanwhile extended losses, sliding more than 3 percent lower after government data showed a smaller-than-expected drop in stockpiles of U.S. crude as refineries hiked output.

The European Oil & Gas index was down 1.46 percent, its lowest level since December 2016.

Looking at individual stocks, the Swedish firm Hexagon was at the top of the European benchmark, up by over 10 percent. This after reports that the software company was in talks to sell itself to a rival in a deal valuing the company at about $20 billion. According to the Wall Street Journal, Hexagon may ultimately decide not to pursue a sale.

The U.K. house builder Bellway was also among the best-performing stocks on Wednesday following a solid trading update. The company's shares dropped in the aftermath of the U.K. General Election but it said Wednesday that it did not see demand cooling ahead of the vote. In fact, it expects full-year completions to increase by almost 10 percent and a full-year operating margin to be slightly above 22 percent, Reuters reported. Other peers were also higher as a result, with Taylor Wimpey and Barratt Developments up by 1.4 percent and 3.2 percent respectively.

Shares of the French energy firm EDF also rose on Wednesday morning, up about 3.2 percent, after appointing Simone Rossi to lead its British unit, which has two new nuclear reactors in the pipeline.

By contrast, Raiffeisen Bank fell more than 6 percent after a rating downgrade by Barclays.

Oil output up despite cut deal, says IEA

OPEC crude output rose by 290,000 barrels per day in May to 32.08 million barrels a day, the highest level seen so far this year. This is due to the restoration of oil production from Libya and Nigeria, which are exempt from supply cuts, IEA noted in a report on Wednesday.

The Eurostat said Wednesday that employment growth in the euro area reached 0.4 percent in the first quarter of this year, the same pace at the end of last year.

The sector was down 0.38 percent in afternoon deals.

Fed meeting eyed

Investors expect the Fed to raise rates but more importantly, they will be watching out for comments on the central bank's future path. The decision is due at 7 p.m. London time.

Meanwhile, politics continue to be the focus. In the U.S., Attorney General Jeff Sessions said it was a "detestable lie" the idea he conspired with Russian authorities to interfere in the outcome of the presidential election. Also, more than 190 Democratic lawmakers sued President Donald Trump accusing him of receiving funds from foreign governments through his firms and thus of violating the constitution.

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In Europe, French President Emmanuel Macron told Prime Minister Theresa May that the U.K. is more than welcome to remain in the EU if it changes its mind. The new U.K. government seems to be taking a less harsh approach to Brexit since the General Election.

In the corporate world, the chief of the German anti-trust commission rejected the government's plans to rescue AirBerlin.

Bundesbank President Jens Weidman said Wednesday morning that the European Central Bank faces the risk of political pressure to maintain its stimulus program.

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