Stocks tread cautiously higher ahead of Fed

Europe Mid Morning Update

It's been a lacklustre start to trading in Europe this morning though the German DAX is trading solidly above the 7,600 level for the first time since 2008. Most investor's eyes are focussed on the Fed meeting later today where speculation is rising that US policymakers will roll over the $45bn of the expiring "twist" money into a new form of asset purchases at the beginning of next year.

There's been little in the way of other news flow with news about the slight shortfall in the Greek debt buyback largely being put to one side.

Some earnings data has proved a lift with Spanish success story and clothes retailer Inditex, owner of the Zara clothes chain, reporting yet another rise in profits, shrugging off the woes in its home country to report an increase in revenues as well as reporting plans to open a website in Canada.

Pursuing the retail theme this morning another clothes retailer, Superdry owner Supergroup continues to make progress after a string of profit warnings, shrugging off its recent accident prone reputation, by reporting higher sales and reporting six month profits of £14.7m.

This outperformance has given the retail sector a lift this morning with Primark owner Associated British Foods enjoying some early gains.

Amongst the other risers Anglo American is higher, buoyed by an upgrade at Barclays, who cite a 1970p medium-term price target.

Oil and gas shares have also pushed higher after the IEA revised its demand outlook for 2013 slightly higher by 110k barrels, though Tullow Oil remains the exception sliding further after being downgraded by Credit Suisse.

UK unemployment showed some improvement in November with monthly claims dropping by 3k, while in the three months to October the count fell by 82k. Average earnings continue to fall relative to inflation over the same period rising 1.8%, less than expected; meaning consumers are likely to feel poorer as prices rise faster than incomes.

The Japanese yen has hit its lowest levels since April despite speculation of further Fed easing as speculation increases about a much more aggressive BOJ after this weekend's election in Japan.