Wall Street steady as investors await Federal Reserve rate decision
US stocks opened slightly lower on Wednesday as investors eyed the Federal Reserve’s monetary policy decision in which the US central bank is expected to raise interest rates again. to continue the fight against inflation.
The blue-chip S&P 500 index fell 0.1%, while the tech-heavy Nasdaq fell 0.2%. The KBW Bank Index lost 0.6% and shares of First Republic, the regional lender at the center of the crisis, fell 2.7%.
Futures markets show traders are expecting the Fed to raise rates by 0.25 percentage points from current levels of 4.5% to 4.75%.
Expectations that interest rates will continue to rise for a long time have eased in recent weeks, as traders bet that turmoil in the banking sector due to the collapse of Silicon Valley Bank and the takeover of rival Credit Suisse by UBS will force the Fed to slow down or even pause its tightening cycle.
“There is a lot of uncertainty about whether the Fed can both tighten and try to ease the strain on regional banks at the same time,” said analysts at SEB Research. at SEB Research said.
The Fed will also publish revised projections of its monetary policy path through 2025, as well as projections for growth, unemployment and inflation. The last time the US central bank released official estimates was in December, when most expected the federal funds rate to peak at 5% to 5.25%.
European stocks rose slightly in afternoon trading. The Stoxx 600 across the region and the Cac 40 in Paris were both 0.2 percent higher, while Germany’s Dax gained 0.4 percent, offsetting initial losses.
London’s FTSE 100 up 0.1% after UK inflation suddenly spiked to 10.4% in February, reinforcing market expectations that the Bank of England will raise its key interest rate on Thursday. Investors are now expecting the BoE to raise interest rates by a quarter point.
“I think the BoE has had the same choice that the European Central Bank made last week and the Fed made tonight,” said Neil Birrell, chief investment officer at Premier Miton. “The equation is to raise interest rates to beat inflation, but not crush the economy and make sure the financial system stays strong – that makes things harder.”
The pound rose 0.2 percent against the dollar, hitting a two-month high while 10-year yields rose 0.12 percentage points to 3.49%. Production of two-year gilts increased by 0.21 percentage points to 3.49%. Yields move inversely with price.
U.S. Treasuries slipped, with yields on two-year notes, which are sensitive to interest rate expectations, rising 0.05 percentage points to 4.23%. The 10-year bond yield rose 0.01 percentage points to 3.62%.
ECB President Christine Lagarde warned on Wednesday of a tit-for-tat move between workers and companies that would shift profit margins and wages, increasing price pressures as both groups try to avoid the impact of higher inflation. Her comments pushed the euro up slightly to a five-week high of $1,080 against the dollar.
Efforts to limit contagion in the financial system, including a proposal from US Treasury Secretary Janet Yellen that the government can step in to support all deposits at the country’s smaller lenders, helped ease tensions on Tuesday.
The Euro Stoxx Banks Index rose 0.4 per cent, adding to its 3.8 per cent gain in the previous session. The Hang Seng Finance and Topix Banks indexes rose 1.7% and 2.2%, respectively.
Asian shares rallied, with Hong Kong’s Hang Seng index up 1.7% and South Korea’s Kospi up 1.2%. Japan’s Topix rose 1.7% after markets reopened after a one-day break for the spring equinox.
Oil prices fell, with US West Texas Intermediate crude down 0.3% to trade at $69.45 a barrel, breaking a nearly 4% gain in two days. International benchmark Brent crude fell 0.2 percent to $75.17.