Investors play it safe ahead of Fed statement

Wed Jun 20, 2012 11:36am EDT
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By Steven C. Johnson

NEW YORK (Reuters) - U.S. Treasury prices fell while major stock markets and the euro were little changed on Wednesday as investors waited to see if the U.S. Federal Reserve would announce new stimulus measures to revive a flagging economy.

But uncertainty over the outcome of the Fed's two-day meeting kept many traders on the sidelines, fearing it might make no announcement of any new stimulus.

Signs that Europe's leaders were making progress on a long-term plan to resolve the continent's debt crisis also eased some pressure on Spanish and Italian government bonds.

The main focus for investors around the world, though, was the Fed, which is expected to announce an extension of its bond-buying program known as "Operation Twist."

A slower pace of U.S. hiring and signs that Europe's nearly three-year-old debt crisis is threatening global growth have raised expectations for more help from the Fed, though it remains unclear just how much help it will offer.

"There is a pretty high level of uncertainty as to what they are going to do," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.

"The consensus is they are going to extend Operation Twist but it is by no means a certainty and everybody wants to wait and see what the decision is going to be."

That uncertainty kept a lid on U.S. stocks, which entered Wednesday's trade on a four-day winning streak.   Continued...

Traders concentrate on their screens at the Frankfurt stock exchange February 2, 2012. REUTERS/Alex Domanski