(Bloomberg) — Stocks struggle for direction as a tone of caution pervades global markets ahead of the Federal Reserve’s interest rate decision.
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Traders are divided on whether the US central bank will announce a cut of 25 or 50 basis points later Wednesday, with the market’s odds of a bigger move currently at 50%.
Investors are looking for the Fed to ease policy enough to respond to recent signs of economic weakness, without worrying that the situation is worse than the market.
“If they are doing 25 basis points this time, the possibility that they can reach a hundred basis points at the end of the year is pretty slim,” said Justin Onuekwusi, chief investment officer at St. James Place Management. “So if you don’t get 50, then you’re going to get a significant movement in the market price.”
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US equity futures were steady, while healthcare stocks led Europe’s Stoxx 600 index lower. The dollar is down and Treasury yields are higher.
If Japan rose to 0.8%, it signaled expectations of a policy divergence between the Fed and the Bank of Japan, which set rates on Friday.
In corporate news, Alphabet Inc. gained in US premarket trading after the Google unit won a court battle over competition with the European Union. Shares of Aperol maker Davide Campari NV fell 6.7% as its chief executive stepped down after just five months.
In the UK, the money market saw the Bank of England deliver modestly less easing after the inflation service rose to 5.6% in August from 5.2% in July, while the main figure was held at just above the target of 2%. Pound strong after Wednesday’s data.
Forecasters generally expect the Federal Open Market Committee to cut rates by a quarter point to a range of 5% to 5.25%, although some expect a half-point move. Investors see even odds of a half point adjustment.
New quarterly projections in the form of “plot points” released at the end of the central bank’s two-day meeting will provide further insight into the path forward for debt costs and the economy. Chairman Jerome Powell will also hold a press conference.
“Given the market disruption, I now expect half a point,” said Francois Rimeau, strategist at La Francaise Asset Management. “Powell’s comments, the dot plot, the economic forecast, everything is the most important piece.”
In Asia, regional stock sizes fell. Chinese equities listed on the mainland were higher after the holiday break, paring gains in Hong Kong amid calls for major economic stimulus.
China’s chip-related stocks rose after the country announced a breakthrough in the development of in-house chip-making equipment. Shanghai Zhangjiang High-Tech Park Development jumped by the daily limit of 10%, while Changchun UP Optotech and Sai Micro Electronics also rallied.
Oil was lower after a two-day gain as traders weighed indications of higher US stockpiles, tensions in the Middle East and the possibility of a Federal Reserve rate hike. Crude jumped Tuesday after thousands were injured in what Hezbollah said was an attack by Israel involving a fence in Lebanon.
This week’s highlights:
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Eurozone CPI, Wednesday
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Fed rate decision on Wednesday
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UK rate decision, there
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US Conf. Key housing indexes, initial jobless claims, existing home sales in the US on Thursday
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FedEx earnings, Friday
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Japan rate decision, there
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Eurozone consumer confidence, there
Some of the main movements in the market:
Savings
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The Stoxx Europe 600 fell 0.4% at 10:26 am London time
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S&P 500 futures were unchanged
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Nasdaq 100 futures were little changed
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Futures on the Dow Jones Industrial Average rose 0.1%
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The MSCI Asia Pacific index was little changed
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MSCI Emerging Markets Index down 0.2%
currency
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Bloomberg Dollar Spot Index down 0.2%
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The euro rose 0.2% to $1.1136
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The Japanese yen rose 0.5% to 141.63 per dollar
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The offshore yuan rose 0.3% to 7.0873 per dollar
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The British pound rose 0.4% to $1.3219
Cryptocurrencies
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Bitcoin fell 0.2% to $60,001.22
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Ether fell 1.1% to $2,318.29
Bond
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The yield on 10-year Treasuries increased two basis points to 3.66%
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Germany’s 10-year yield advanced three basis points to 2.17%
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UK 10-year yield advanced five basis points to 3.82%
Commodity
This story was produced with the help of Bloomberg Automation.
–With assistance from James Hirai, Winnie Hsu and Margaryta Kirakosian.
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