EUROPE MARKETS: Banks Lead Gains In European Stocks

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets rebounded on Wednesday, as investors waited to see if the U.S. Federal Reserve will announce a reduction in its monthly asset purchases.

The Stoxx Europe 600 index gained 0.5% to 313.32, after closing down 0.5% on Tuesday.

Banks helped lift the index, with Société Générale SA up 2.4% in Paris, Standard Chartered PLC rising 1.8% in London and Banco Santander SA (SAN) 1.6% higher in Madrid.

Shares of Nokia Oyj (NOK) rose 2.2% after Credit Suisse lifted the Finnish firm to outperform from neutral.

Shares of Smiths Group PLC climbed 3.2% after the engineering company declared a special dividend for the full year.

More broadly, investors in Europe waited for the U.S. Fed's monetary policy announcement later in the day. Analysts expect the central bank to announce a reduction of $10 billion to $15 billion to its $85 billion-a-month bond-buying program at 2 p.m. Eastern Time, followed by Fed Chairman Ben Bernanke commenting on the decision at a news conference. Read: How stocks may react to the Federal Reserve decision

Analysts at Daiwa Capital Markets said in a note, however, that the decision is far from clear-cut, attaching a 40% probability of no tapering.

"But with market expectations clearly slanted towards a first move from the Fed, and with several FOMC members clearly itching to get the process started, a move today on balance looks likely. Some are also looking for any tapering to be accompanied by a downward shift in the FOMC's unemployment threshold to 6% from the current 6.5%, in an attempt to convince market participants that the [federal funds rate] will remain at its current level for longer," the analysts said.

U.S. stock futures pointed to a slightly higher open ahead of the decision.

Back in Europe, the U.K.'s FTSE 100 index gained 0.1% to 6,578.13, while France's CAC 40 index put on 0.5% to 4,167.46. Germany's DAX 30 index added 0.5% to 8,638.72.

HeidelbergCement AG climbed 2% after Goldman Sachs lifted the German firm to buy from sell, saying it has the most attractive long-term growth prospects versus its peers.

On a more downbeat note, shares of Hochtief AG gave up 1.3% after Goldman Sachs cut the construction firm to neutral from buy.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires