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European Shares Poised For Cautious Start Ahead Of Fed Decision

european market 021219 21sep22 lt

European stocks are seen opening on a cautious note Wednesday as investors await the Fed's interest-rate decision, the accompanying statement and Chair Jerome Powell's press conference later in the day for clues as to whether the central bank remains primarily focused on inflation.

Markets are seemingly well positioned for a 75-bps rate hike along with a hawkish update, although some see an outside chance for a 100-basis point rate hike.

Thursday will see announcements from the Bank of Japan, Swiss National Bank and Bank of England (BoE). Economists are split on whether the BoE will opt for a 50- or a 75-basis-point hike.

The Asian Development Bank today cut its economic growth forecast for developing Asia and China, citing an ongoing conflict in Ukraine, Beijing's Covid Zero policy and central banks' efforts to combat inflation.

According to the bank's outlook update, China's GDP growth for 2022 is expected to be slower at 3.3 percent against a 4 percent expansion seen previously.

Asian markets traded deep in the red as global bond yields rose on expectations of further policy tightening.

The yield on two-year U.S. Treasury notes rose to almost a 15-year high while that on the benchmark ten-year note jumped to a new eleven-year high.

Gold held at 2-1/2-year low amid dollar strength and rising yields, while oil edged up slightly after ending sharply lower overnight on worries about the outlook for energy demand.

Public sector finance data from the U.K. is due later in the session, headlining a light day for the European economic news.

U.S. stocks fell sharply overnight, and Treasury yields surged to multi-year highs as caution gripped markets ahead of the Fed's rate hike announcement.

Ford's warning of big problems with supply chains and input costs also raised concerns about earnings outlook.

The Dow and the tech-heavy Nasdaq Composite both shed around 1 percent while the S&P 500 dropped 1.1 percent.

European stocks ended lower on Tuesday as a measure of German producer prices soared to record levels and a full-point increase by Swedish central bank exceeded forecasts.

The pan European Stoxx 600 fell 1.1 percent. The German DAX gave up 1 percent, France's CAC 40 index declined 1.4 percent and the U.K.'s FTSE 100 dipped 0.6 percent.

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