European shares rose on Wednesday after two days of volatile trading in global markets, with investors braced for the US Federal Reserve’s interest rate decision.
Futures that track the U.S. S&P 500 index were up 0.4 percent in early Chicago trade, although the blue-chip stock benchmark remains at risk of recording its worst January record. Nasdaq 100 futures, according to the index of the largest stocks on the tech-heavy Nasdaq Composite, rose 0.9 percent.
The US central bank will wrap up its two-day monetary policy meeting on Wednesday and is expected to signal plans for its first coronavirus pandemic. interest rate hike in March.
The market has priced in about four increments in December when the Fed returned to extremely loose monetary policies, which boosted the stock market and increased demand for speculative assets.
“[The Fed has] become more hawkish and in the latest data there is nothing to justify [officials] Anne Beaudu, co-head of global bonds at fund manager Amundi, said.
Within minutes of the December meeting, Fed revealed Their officials discussed shrinking the central bank’s $9 billion balance sheet, which grew after the bank bought large amounts of U.S. Treasurys and debt assets. other to reduce borrowing costs of companies and households from March 2020.
The annual US consumer price inflation rate reached near 40-year high 7% last month, with price increases extending from areas affected by pandemic-related supply chain bottlenecks to most categories, including food and rent . Unemployment Collapsed close to pre-pandemic levels, while labor shortages and record job openings boosted wage growth.
The Fed’s hawkish pivot has depressed stock market valuations around the world, as higher interest rates reduce the present value of future profits for companies in the investor’s model. Speculative tech stocks have taken some biggest blow.
But selling has also extended to other stock market sectors as investors question whether a cycle of rapid rate hikes threatens economic growth.
At one point on Tuesday, the Russell 3000 index, a broad measure of US-listed stocks, was trading 32 percent below its 52-week high, as calculated by Bespoke Investment Group. About a third of the stocks in the index are trading below their levels at the end of 2019.
The US Treasury market steadied on Wednesday as bond investors awaited an update from the Fed on future buying plans. Yields on the benchmark 10-year Treasury note, which rose from about 1.5% at the end of last year, fell 0.01 percentage points to 1.78%.
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