LONDON — The Greek government's victory in a confidence vote helped steady markets on Wednesday before an interest rate decision from the Federal Reserve, though a shock profit warning from Dutch lighting and electronics firm Philips kept sentiment in check.
Following days of feverish trading activity due to concerns about a possible Greek default, investors have been calmed — for now, at least — by the confidence vote early Wednesday in Greek Prime Minister George Papandreou's government.
Investors will be hoping that paves the way to the passage of another batch of austerity measures in a vote next Tuesday. The Greek Parliament needs to pass the additional €28 billion ($40.2 billion) in budget cuts and new taxes and back a €50 billion privatization program so the country can get its hands on €12 billion of rescue loans by mid-July to stave off a disastrous default.
Greece's partners in the eurozone and the International Monetary Fund have made the cash contingent on a positive Parliamentary vote on the austerity package.
"Considering Papandreou made it perfectly clear ahead of yesterday's vote that he would push for new austerity measures in order to qualify for a second bailout package, it would appear that he should have enough support to pass the measures," said Benjamin Reitzes, an analyst at BMO Capital Markets.
Some of the calm was dented by a warning by Royal Philips Electronics NV that worse-than-expected demand in western Europe hit its second quarter performance.
Elsewhere in Europe, the FTSE 100 index of leading British shares closed down a tad at 5,772.99, while Germany's DAX fell 0.1 percent to 7,278.19. The CAC-40 in France ended 0.2 percent lower at 3,871.37.
In the U.S., the Dow Jones industrial average was flat at 12,189 while the broader Standard & Poor's 500 index rose 0.1 percent at 1,297.
The focus of attention in the U.S. will be on the Fed's rate-setting meeting and the ensuing press briefing from Fed chief Ben Bernanke.
Analysts will be looking to see if Bernanke sounds more dovish after the recent run of U.S. economic data. Though Bernanke is expected to point to the soft economic patch, he's unlikely to indicate that the Fed will alter its course anytime soon, meaning that the key interest rate will remain near zero percent and the $600 billion monetary stimulus will end as anticipated this month.
"We do not expect any indications that a further round of Treasury purchases is likely, nor do we expect the Fed to suggest it is likely to move to less accommodative monetary policy any time soon," said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank.
If the script deviates too far from expectations, then the dollar could move. Ahead of the policy decision and the ensuing press briefing, the dollar was modestly lower.
The euro was 0.2 percent higher at $1.4404, while the dollar fell 0.2 percent to 80.04 yen.
The pound was suffering somewhat after the minutes to the Bank of England's rate-setting meeting suggested that rock-bottom interest rates would not be rising anytime soon. The rate-setters also raised the possibility of another monetary stimulus.
The pound was trading 0.6 percent lower at $1.6131.
Earlier in Asia, markets were buoyed following the Greek confidence vote.
Japan's Nikkei 225 index gained 1.8 percent to close at 9,629.43, while Hong Kong's Hang Seng ended marginally higher at 21,859.97.
Mainland Chinese shares were mixed, overshadowed by a government forecast that inflation will climb further in June due to massive flooding in some regions.Comment on this story
The benchmark Shanghai Composite Index edged 0.1 percent higher to 2,649.30 while the Shenzhen Composite Index was little changed at 1,088.30.
Oil prices Oil prices remained relatively soft, with benchmark oil for August delivery down 46cents to $94.63 a barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.