US equity futures were steady and European stocks edged higher as investors prepared for the Federal Reserve’s much-anticipated interest-rate decision. The pound rallied to a six-week high after a surprise rise in UK inflation increased pressure for action from the Bank of England.
(Bloomberg) — US equity futures were steady and European stocks edged higher as investors prepared for the Federal Reserve’s much-anticipated interest-rate decision. The pound rallied to a six-week high after a surprise rise in UK inflation increased pressure for action from the Bank of England.
Contracts for the S&P 500 and the tech-heavy Nasdaq 100 were marginally lower. Virgin Orbit Holdings Inc. was set for a record surge, based on premarket trading, after the satellite launch company said it was resuming some operations. The Stoxx Europe 600 Index was slightly higher, with banks leading gains as fears about the financial system eased following UBS Group AG’s rescue deal for Credit Suisse Group AG.
All eyes will be on the Fed later as Chair Jerome Powell tries to balance his campaign to conquer inflation against a sudden banking crisis. The complexities confronting global central banks were underscored by data from the UK on Wednesday, showing inflation unexpectedly accelerated in February, surpassing all economists’ forecasts on the eve of a rates decision from the BOE.
The pound extended gains as traders firmed up bets on a quarter-point hike on Thursday, while UK bonds fell. A Bloomberg index of dollar strength retreated. Treasury yields fell after a surge on Tuesday that added 19 basis points to the two-year maturity and 12 basis points to the 10-year benchmark.
Traders placed greater odds that the Fed will raise interest rates 25 basis points after market pricing was split between a hike and a pause earlier in the week. Officials at the central bank were set to issue updated rate projections for the first time since December, offering guidance on whether they still expect any additional increases this year.
“It’s become much more concrete about what the market expects — which is 25 basis points – so it’s more about the guidance than the actual decision itself at this point,” said Hani Redha, global multi-asset portolio manager at Pinebridge Investments Europe Ltd. “The past couple of days have been quite positive so I wouldn’t be surprised if we see some consolidation between now and this afternoon, as investors take some chips off the table and wait for direction.”
Read: Fed Caught Between Inflation and Bank Crisis: Decision-Day Guide
European investors were again focused on UBS after the bank said Wednesday it wanted to buy back some of its euro-denominated senior unsecured bail-in notes in the wake of its rescue of Credit Suisse. UBS shares have erased almost all of the losses made during the recent banking rout.
Meanwhile, European Central Bank President Christine Lagarde said the ECB will take a “robust” approach that allows it to respond to inflation risks as needed but also aid financial markets if threats emerge.
“Bringing inflation back to 2% over the medium term is non-negotiable,” Lagarde told a conference on Wednesday. “We will do so by following a robust strategy that is data-dependent and embeds a readiness to act, but that does not entertain trade-offs around our primary objective.”
Elsewhere in markets, crude oil dropped, trimming some of its gains from rallies on Monday and Tuesday. Gold rose.
Key events this week:
- US Treasury Secretary Janet Yellen to appear at Senate subcommittee hearing, Wednesday
- FOMC rate decision, news conference from Chair Jerome Powell, Wednesday
- EIA crude oil inventory report, Wednesday
- Eurozone consumer confidence, Thursday
- BOE interest rate decision, Thursday
- Swiss National Bank rate decision and press conference, Thursday
- US new home sales, initial jobless claims, Thursday
- US Treasury Secretary Janet Yellen testifies to a House Appropriations subcommittee, Thursday
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- US durable goods, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 6:14 a.m. New York time
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0786
- The British pound rose 0.6% to $1.2288
- The Japanese yen was little changed at 132.64 per dollar
Cryptocurrencies
- Bitcoin was little changed at $28,165.5
- Ether fell 0.4% to $1,793.42
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.59%
- Germany’s 10-year yield advanced three basis points to 2.32%
- Britain’s 10-year yield advanced eight basis points to 3.45%
Commodities
- West Texas Intermediate crude fell 0.7% to $69.17 a barrel
- Gold futures rose 0.3% to $1,964.70 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Liza Tetley.
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