European Stock Futures Mixed; Fed Rate Decision Prompts Caution

© Reuters.

By Peter Nurse 

Investing.com - European stock markets are expected to open in a cautious manner Wednesday ahead of the conclusion of the Federal Reserve’s latest policy-setting meeting, with investors bracing for the biggest interest rate hike since 2000.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.2% lower, and CAC 40 futures in France dropped 0.2%, while the FTSE 100 futures contract in the U.K. rose 0.1%.

The U.S. central bank is expected, at 2 PM ET (1800 GMT), to raise interest rates by half of a percentage point and announce the start of reductions to its $9 trillion balance sheet, intensifying efforts to bring down red hot inflation.

Aside from the actual interest rate decision, Fed Chair Jerome Powell's news conference, 30 minutes later, will also be studied carefully for clues on how far and how fast the central bank is prepared to hike rates, particularly as the Fed’s next meeting is not until June.

Global equity markets suffered a very weak April on worries that soaring inflation will prompt central banks, and the Fed, in particular, to hike rates aggressively, weighing on economic growth going forward.

Corporate earnings will also remain in focus Wednesday. 

Volkswagen (VIE:VOWG_p) will be in the spotlight after Europe’s top carmaker stuck to its outlook for the current year, citing strong first-quarter results and an improvement in chip supply expected for the second half of the year.

German medical device maker Siemens Healthineers (F:SHLG) raised its targets for the 2022 financial year due to increased demand for rapid COVID-19 antigen tests, while Norwegian energy giant Equinor (OL:EQNR) posted record pretax profits for the first quarter as the war in Ukraine sent the price of natural gas soaring to all-time highs.

Danish jewellery-maker Pandora (CSE:PNDORA) reported better-than-expected sales for the first quarter on Wednesday and slightly raised its full-year sales guidance.

Quarterly earnings from the likes of UniCredit (BIT:CRDI), Enel (BIT:ENEI), Fresenius (BIT:FREG) and TeamViewer (VIE:TMV) are also due Wednesday.

On the data front, final PMI readings for April are due in the Eurozone, along with March’s retail sales figures.

Oil prices strengthened Wednesday after industry data pointed to a sharp drop in U.S. crude stocks, signalling a tightness to supply in the world’s largest oil consumer.

Crude stocks fell by 3.5 million barrels the week ended April 29, according to data from American Petroleum Institute released Tuesday, more than an expected 800,000-barrel drop.

Investors now await crude oil supply data from the Energy Information Administration, due later in the day.

By 2 AM ET, U.S. crude futures traded 1.3% higher at $103.72 a barrel, while the Brent contract rose 1.2% to $106.19. 

Additionally, gold futures fell 0.4% to $1,862.71/oz, while EUR/USD traded 0.1% lower at 1.0508.