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* STOXX Europe 600 index ends down 0.1 percent
* Caution prevails a day ahead of Fed, BoJ meetings
* Political worries, weak bank stocks weigh on Italy
* GVC Holdings top STOXX gainer after target upgrades
By Danilo Masoni
MILAN , Sept 20 (Reuters) - European shares ended little changed on Tuesday as investors remained cautious ahead of monetary policy decisions from the Federal Reserve and Bank of Japan on Wednesday.
Market volatility has spiked this month because of changing expectations over when the Fed could raise rates, but mixed data cast doubt over the health of the world’s biggest economy, reducing the chance of a hike this month.
Futures are pricing the chance of a U.S. rate rise this week at just 15 percent, while the chance of a December hike is seen at almost 60 percent, according to CME Group’s FedWatch tool.
However, some investors believed there was still room for a surprise rate increase on Wednesday.
“Postponing the decision to December and betting that U.S. macro data will remain positive in the next three months may be a risky bet,” Adrien Pichoud, chief economist at SYZ Asset Management in Geneva, said.
“We view the risk of a surprise hike as important and recommend to position portfolios (to) limit exposure to risk assets, especially U.S. and EM equities,” he added.
The BoJ will also be closely watched for near-term market direction. JP Morgan analyst Mislav Matejka said earlier this week that the Japanese central bank could disappoint, warning that equities should continue to unwind their summer bounce.
Europe’s STOXX 600, which has risen around 10 percent since the end of June but touched a six-week low earlier this month on the back of worries over central bank action, ended down 0.1 percent.
Italy’s FTSE MIB fell 1.2 percent, making it the worst performing index in Europe. Traders cited growing uncertainty ahead of an upcoming referendum on Prime Minister Matteo Renzi’s constitutional reform plan.
Credit Suisse said the referendum could cause bigger volatility but did not expect it to trigger any systemic shock. It said that if the “No” front won, there could be a delay in Italian banks’ recapitalisation plans but Italian bonds should remain largely protected by the ECB’s bond-buying programme.
Troubled Monte dei Paschi bank fell 6.4 percent, the biggest loser in Milan, on fears over the feasibility of its rescue plan.
The STOXX Europe 600 Oil and Gas index dropped 0.9 percent, the worst sectoral performer, as oil prices hovered around six-week lows on global over-supply concerns.
Shares in Royal Dutch Shell, Eni and Total fell between 0.5 percent and 1.8 percent.
Among other sharp movers, shares in business services firm Regus slumped 6.4 percent after a share placement.
GVC Holdings surged 6.6 percent, the top gainer on the STOXX, following target upgrades at Cannacord and Investec. (Additional reporting by Atul Prakash in London; editing by Mark Heinrich)