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Fed Announcement Likely To Be In Focus On Wall Street

The major U.S. index futures are pointing to a higher open on Wednesday with the tech-heavy Nasdaq potentially reaching another new record high.

While the Dow futures are pointing to a slightly higher open, rising by just 30 points, the Nasdaq futures are up by 79 points.

The Nasdaq may continue to benefit from gains by big-name tech companies such as Apple (AAPL), Amazon (AMZN), Facebook (FB) and Google parent Alphabet (GOOGL), which are all moving higher in pre-market trading.

Early trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve's monetary policy announcement this afternoon.

The Fed is widely expected to leave interest rates and policy unchanged, but traders will pay close attention to the accompanying statement for clues about future policy changes.

Some investors are hoping the Fed will provide more clarity about the unlimited bond purchasing programs announced in March.

The central bank is also due to provide its first economic projections since the coronavirus crisis began, which could impact traders' generally optimistic outlook for a quick economic recovery.

After moving significantly higher over the past several sessions, stocks gave back some ground during trading on Tuesday, although strength among technology stocks lifted the tech-heavy Nasdaq to a new record high.

The Nasdaq pulled back off its best levels after topping 10,000 for the first time but still closed up 29.01 points or 0.3 percent at 9,953.75. Meanwhile, the Dow slumped 300.14 points or 1.1 percent to 27,272.30 and the S&P 500 slid 25.21 points or 0.8 percent at 3,207.18.

The weakness on Wall Street partly reflected profit taking, as traders cashed in on the strong gains posted in recent sessions.

Selling pressure was somewhat subdued, however, with stocks holding on to the bulk of their recent gains as traders generally remain optimistic about a quick economic recovery.

Traders also seemed reluctant to make more significant moves ahead of the Federal Reserve's monetary policy announcement on Wednesday.

The Fed is not expected to announce any significant policy changes, although traders are still likely to pay close attention to the central bank's assessment of the economic outlook.

Energy stocks turned in some of the market's worst performances after helping to lead the way higher in recent sessions. The pullback came despite an increase by the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 7.4 percent, the NYSE Arca Natural Gas Index plummeted by 5.5 percent and the NYSE Arca Oil Index tumbled by 4.1 percent.

Significant weakness was also visible among banking stocks, as reflected by the 2.3 percent slump by the KBW Bank Index. The index gave back ground after ending the previous session at a three-month closing high.

Tobacco, transportation and steel stocks also saw considerable weakness on the day, while gold and retail stocks moved to the upside.

Commodity, Currency Markets

Crude oil futures are sliding $0.65 to $38.29 a barrel after climbing $0.75 to $38.94 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,729.90, up $8 compared to the previous session's close of $1,721.90. On Tuesday, gold jumped $16.80.

On the currency front, the U.S. dollar is trading at 107.36 yen compared to the 107.76 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1369 compared to yesterday's $1.1340.

Asia

Asian stocks ended mixed on Wednesday as investor attention turned to the U.S. Federal Reserve announcement later today.

The Fed is not expected to announce any significant policy changes, but investors will still pay close attention to the central bank's assessment of the economic outlook.

Chinese shares ended lower after the release of inflation data. The benchmark Shanghai Composite Index dropped 12.36 points, or 0.4 percent, to 2,943.75, while Hong Kong's Hang Seng Index ended marginally lower at 25,049.73.

Consumer prices in China fell 0.8 percent month-on-month in May, the National Bureau of Statistics said, missing expectations for a fall of 0.5 percent following the 0.9 percent drop in April.

On a yearly basis, consumer prices rose 2.4 percent - also shy of forecasts for an increase of 2.7 percent and down sharply from 3.3 percent in the previous month.

The bureau also said that producer prices were down an annual 3.7 percent versus expectations of a fall of 3.3 percent following the 3.1 percent slide a month earlier.

Japanese shares ended on a mixed note ahead of the Fed announcement. The Nikkei 225 Index rose 33.92 points, or 0.2 percent, to 23,124.95, while the broader Topix closed 0.2 percent lower at 1,624.71.

Exporters finished broadly lower as the yen strengthened after the release of machinery orders data. Tech stocks surged, with Advantest rising 2.7 percent and Tokyo Electron adding 1.5 percent.

Honda Motor rose 0.4 percent. The automaker said its Turkey plant resumed operations following a cyberattack that disrupted its internal network and brought some factories around the world to a standstill.

The value of core machine orders in Japan tumbled a seasonally adjusted 12.0 percent month-on-month in April, standing at 752.6 billion yen, the Cabinet Office said. That missed estimates for a fall of 8.6 percent following the 0.4 percent drop in March.

On a yearly basis, core machine orders sank 17.7 percent - again missing forecasts for a fall of 14.0 percent following the 0.7 percent decline in the previous month.

S&P Global Ratings revised its outlook on Japan to stable from positive, citing increased uncertainty around debt stabilization. The agency affirmed the sovereign ratings at 'A+'.

Australian markets ended marginally higher to extend gains for the seventh straight session. The benchmark S&P/ASX 200 Index inched up by 3.50 points, 0.1 percent, to 6,148.40, while the broader All Ordinaries Index ended up 6.40 points, or 0.1 percent, at 6,269.30.

Electronics retailer Harvey Norman soared 7.3 percent after announcing a huge jump in sales during Covid-19 lockdown. Retail conglomerate Wesfarmers surged 4.9 percent. CSL led the gainers in the healthcare sector, ending up by 2.6 percent.

Meanwhile, the big four banks fell between 0.8 percent and 1.1 percent. Santos and Woodside Petroleum fell around 3 percent as oil prices edged lower on concerns over rising U.S. inventories.

Online retailer Kogan.com entered a trading halt ahead of a share sale to institutional and retail investors.

Australian consumer confidence rebounded to around pre-Covid levels in June, driven by continued success in bringing the coronavirus under control, survey data from Westpac showed today.

The Westpac-Melbourne Institute Index of Consumer Sentiment advanced to 93.7 in June from 88.1 in May.

Seoul stocks rose for the ninth consecutive session as investors awaited the Fed meeting outcome. The benchmark Kospi gained 6.77 points, or 0.3 percent, to close at 2,195.69, with online portal operator Naver and its smaller rival Kakao climbing around 3 percent.

Europe

European stocks have fallen slightly on Wednesday after the Organization for Economic Cooperation and Development forecast the global economy would contract 6.0 percent this year before bouncing back with 5.2 percent growth in 2021.

As the threat of a second wave of contagion keeps uncertainty high, OECD chief economist Laurence Boone wrote in an introduction to the refreshed outlook that now was no time to fan the flames of trade tensions and governments should cooperate on a treatment and vaccine for the virus.

Investors are also looking ahead to comments by Federal Reserve Chairman Jerome Powell and the central bank's economic forecasts later in the day.

The German DAX Index and the French CAC 40 Index are both down by 0.1 percent, although the U.K.'s FTSE 100 Index has risen by 0.3 percent.

HSBC Holdings has declined after U.S. Secretary of State Michael Pompeo criticized the bank for backing China's move to impose national security legislation in Hong Kong.

Paragon Banking Group has also dropped after its first-half profit before tax fell 20.7 percent to 57.1 million pounds from last year's 72.0 million pounds.

Shaftesbury has also slumped as the real estate investment trust reported a loss before tax of 287.6 million pounds for the 6 months ended March 31, 2020 compared to a profit of 38.7 million pounds in the prior year.

Meanwhile, banks are moving mostly higher after Reuters reported that the European Central Bank is drawing up a "bad bank" scheme to cope with potentially hundreds of billions of euros of unpaid loans due to the coronavirus crisis.

Airbus SE has also risen after the French government unveiled a €15 billion ($17 billion) support plan for the aerospace industry.

Spanish fashion retailer Inditex has also moved to the upside. After booking its first ever loss in a quarter due to the pandemic, the company said that trends were improving in May.

Hornbach Holding AG & Co. KGaA Group has surged higher after reporting substantial sales and earnings growth in the first quarter of 2020/21.

In economic news, French industrial production in April dropped 20.1 percent from March, when output was down 16.2 percent, data from the statistical office Insee showed. Economists had forecast a monthly fall of 20 percent in April.

Similarly, manufacturing output decreased 21.9 percent on a monthly basis after easing 18.3 percent in March.

U.S. Economic Reports

After reporting the biggest drop in U.S. consumer prices in over a decade in the previous month, the Labor Department released a report on Wednesday showing a modest decrease in consumer prices in the month of May.

The Labor Department said its consumer price index edged down by 0.1 percent in May after slumping by 0.8 percent in April. Economists had expected consumer prices to come in unchanged.

The dip in consumer prices came as lower prices for motor vehicle insurance, energy, and apparel more than offset increases in prices for food and shelter.

The report said core consumer prices, which exclude food and energy prices, also slipped by 0.1 percent in May after falling by 0.4 percent in April. Core prices were also expected to come in unchanged.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended June 5th.

Crude oil inventories are expected to decrease by 1.7 million barrels after falling by 2.1 million barrels in the previous week.

The Federal Reserve is due to make its monetary policy announcement at 2 pm ET, followed by Fed Chair Jerome Powell's post-meeting press conference at 2:30 pm ET.

Stocks In Focus

Shares of Red Robin Gourmet Burgers (RRGB) are moving sharply lower in pre-market trading after the restaurant chain reported a wider than expected fiscal first quarter loss on revenues that came in below analyst estimates.

Video game retailer GameStop (GME) may also come under pressure after reporting a fiscal first quarter loss that was wider than analysts had expected.

On the other hand, shares of Etsy (ETSY) are likely to see initial strength after Jefferies upgraded its rating on the online crafts retailer to Buy from Hold.

Danish biotechnology company Genmab (GMAB) may also move to the upside after entering a broad collaboration with AbbVie (ABBV) to jointly develop and commercialize three of Genmab's next-generation bispecific antibody products, including epcoritamab.

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