European markets gain 1% in light volumes as investors await FOMC

Joshua Raymond, Market Strategist at City Index commented: "European markets quickly recovered yesterdays losses to trade higher by 1%, helped by light volumes as investors focus towards tonight's FOMC rate decision.

With volumes starting to thin, Indices are more susceptible to spikes and this is what we have seen today with the majority of the small volumes looking to pick up equities from yesterdays weakness.

We have seen investors looking to delve back into the banking sector buoyed by yesterday's weakness and by reported delays in new capital adequacy rules for major banks by the Basle Committee. If true, this would save major banks from a potential rush to top up their capital base and give them extra time to do so in the manner they would prefer. As a result, the banking sector is the main driver to equity markets in Europe today.

The weaker US Dollar is also helping to facilitate some interest in the miners today, with the sector in London rallying almost 1% after weakness yesterday.

Macro data in focus

The FOMC Rate decision tonight, as well as CPI and Housing Starts are all in focus today and this is certainly contributing to the lighter volumes. After yesterdays higher than expected PPI data, CPI will take a heavier focus and housing starts will also be looked upon keenly after Octobers unexpected drop of 10.6%. Little action is expected from the Fed tonight by the market with regards to rates, but there will be a keen eye towards the language used regarding future rate moves.

Low Volumes

As we head deeper into the holiday season, investors will inevitably start to think more about what Christmas presents to buy than what stocks to pick up and this could make Indices more susceptible to that extra bit of volatility."