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European stocks steady, euro rises before Fed decision

Federal Reserve Chairman Ben Bernanke pictured during a press conference at the Federal Reserve Bank on January 25 in Washington, DC. European stock markets were mixed on Wednesday amid hopes the US Federal Reserve would announce more stimulus to boost the world's biggest economy and as a government emerged in crisis-struck Greece.

European stock markets were mixed on Wednesday amid hopes the US Federal Reserve would announce more stimulus to boost the world's biggest economy and as a government emerged in crisis-struck Greece.

The European single currency rose versus the dollar as traders also digested the outcome of a G20 summit aimed at stamping out fires in the 17-nation eurozone.

At the close, London's benchmark FTSE 100 index added 0.64 percent to 5,622.29 points. In Frankfurt, the DAX 30 rose 0.45 percent to 6,392.13 points, while in Paris the CAC 40 gained 0.28 percent to 3,126.52 points.

In Madrid, the Ibex-35 index rose 1.53 percent to 6,796.10 points and in Milan the FTSE MIB rose 2.13 percent to 13,732 points.

In midday trade on Wall Street, the Dow Jones Industrial Average was down by a slight 0.06 percent and the S&P 500-stock index had slipped 0.12 percent, while the tech-rich Nasdaq fell 0.12 percent.

Asian markets mostly climbed, with Tokyo closing up 1.11 percent and Hong Kong ending 0.53 percent higher.

In foreign exchange deals, the euro rose to $1.2702 from $1.2686 late on Tuesday in New York. The US dollar rose to 79.47 Japanese yen from 78.94 yen.

Investors were treading carefully, "lest they are caught out this evening by a Fed statement that confounds expectations," said Chris Beauchamp, a market analyst at IG Index trading group.

All eyes were on Washington, where the Fed was to wrap up a two-day meeting that many expect to end with a fresh injection of capital to shore up the sputtering US economic recovery as jobs growth slows.

Some economists said policymakers could use a third round of asset purchases known as quantitative easing (QE3) or use other tools at their disposal.

Recent comments from central bank officials have offered mixed signals about what actions they might take, while Fed Chairman Ben Bernanke kept his cards close to his chest in his latest testimony to Congress.

"As the global economy teeters on the brink ... the hope for many is that ... Ben (Bernanke) and his band of policymakers at the Fed will unleash a new round of stimulus, or at the very least tweak the language of their statement to make it more accommodative," said Beauchamp.

"We had an appetiser this morning to the Fed meeting, when the Bank of England published the minutes of its latest policy meeting."

It was revealed on Wednesday that Bank of England policymakers narrowly voted against pumping Britain's recession-hit economy with more new cash under its own QE programme, when it held a meeting in early June.

BoE Governor Mervyn King and three other central bank members voted for more stimulus -- up to a total of £50 billion (62 billion euros, $79 billion) -- but they were out-numbered by five policymakers wishing to sit tight.

Greece meanwhile announced a new government led by conservative Antonis Samaras who is faced with the daunting task of keeping Greece in the euro and revising an unpopular EU-IMF bailout despite resistance from European partners.

Ishaq Siddiqi, Market Strategist at ETX Capital said: "This has offered some hopes that Greece has the political will to finally sort out its mess, and if headlines this week continue to suggest greater stability in Greece, markets are likely to end the week on a firmer footing."

European Union leaders were gearing up for more meetings in their battle to save the eurozone and not just Greece, promising G20 partners they would integrate their banking sector and restart growth.

Backed by key EU members including Germany, France and Britain, the pledges came on Tuesday at the end of two days of talks between the Group of 20 powers in the Mexican beach resort of Los Cabos.

"In Los Cabos the seeds of a pan-European recovery plan were planted," said IMF managing director Christine Lagarde, looking forward to next week's European summit, when a more concrete action plan was expected to emerge.

US President Barack Obama spoke for many of his colleagues when he expressed relief at Europe's "heightened" urgency, adding: "I am confident that over the next several weeks, Europe will paint a picture of where we need to go."

In their joint statement, the G20 leaders vowed to "take the necessary actions to strengthen global growth and restore confidence."

The meeting looked to calm markets that have been rattled by Europe's struggling banking system, especially that of Spain, which this month was promised up to 100 billion euros ($125 billion) to help troubled lenders.