Business & Economy
Europe pushes higher as traders await Fed rates decision
European stock markets pushed higher on the day as investors braced for the outcome of the US Federal Reserve’s meeting, and any hints about faster tightening of monetary policy.
In London, the FTSE 100 (^FTSE) rose 1.6% after opening, with a boost in the travel, leisure and technology sectors, while the CAC (^FCHI) gained 1.3% in Paris and the Frankfurt DAX (^GDAXI) was 1.5% up.
Sentiment continues to be driven by the cross currents of events on the Ukraine, Russia border, as well as the Fed interest rate decision.
The prospect of higher US interest rates has been affecting markets in recent weeks, and the Fed is expected to signal that its hiking cycle will begin in March amid rising inflation and low unemployment.
It is also expected to end its quantitative easing stimulus programme this quarter.
Across the pond, S&P 500 futures (ES=F) were up 0.7%, Dow futures (YM=F) climbed 0.6%, and Nasdaq futures (NQ=F) were 1% higher as trade began in Europe.
On Tuesday, stocks across the major US markets each finished lower, although they recovered from deeper declines earlier in the trading day, with traders continuing to shift to safe haven investments such as the dollar and gold.
In the year to date the Dow Jones has shed 5.6%, the S&P 500 8.6% and the Nasdaq 13.5%.
“The year-to-date selloff of real rates and equity markets began with the Fed surprising markets by how much they were already considering an early and aggressive use of quantitative tightening (QT) to augment their tightening of policy, so any incremental information will be devoured,” Jim Reid of Deutsche Bank said.
“While it’s likely too early for the Fed to deliver specific QT details today, our economists believe it’s possible chair Powell begins to socialise a range of potential QT outcomes to start the give-and-take involved with guiding market expectations.”
Asian markets got off to a cautious start overnight, after the volatile Wall Street session, but managed to recover and eke out some gains.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3% in early trade but has skidded 2.4% this year, and is testing mid-December’s one-year low.
In Japan, the Nikkei (^N225) fell 0.4% on the day to hover around its lowest level since December 2020, while the Hang Seng (^HSI) rose 0.2% in Hong Kong, and the Shanghai Composite (000001.SS) ended 0.7% higher.
Elsewhere, the Bank of Canada is also meeting on Wednesday, with economists weighing up whether it will raise interest rates in an attempt to pull inflation down from a 30-year high of 4.8%.
The consensus is that it will vote to keep rates on hold at 0.25% and move them in line with the Fed in March.
