European Stocks Poised for Higher Open as Markets Await Fed Rate Decision

European equities were expected to open slightly higher on Wednesday as investors awaited the U.S. Federal Reserve’s interest-rate decision later in the day. Markets are pricing in a 92.4% probability of a 25-basis-point rate increase following the latest hotter-than-expected inflation data.

The Fed’s potential first hike since July 2023, scheduled just seven weeks before the midterm elections, could draw renewed criticism from the White House.

The post-meeting statement, updated economic projections and rate forecasts, along with Chair Kevin Warsh’s press conference, are expected to provide further insight into whether additional rate increases may follow.

Asian markets traded modestly higher as U.S. stock index futures recovered after two consecutive sessions of losses on Wall Street.

The yield on the U.S. 10-year Treasury note slipped to 4.9875% in Asian trade after briefly moving above 5% on Tuesday for the first time in three years.

The U.S. dollar held recent gains near a two-week high, while gold rose 0.7% to $4,325 an ounce after a two-day decline.

Oil prices fell about 0.5% after industry data showed an unexpected increase in U.S. crude inventories.

Both Brent and WTI crude futures settled more than $3 higher on Tuesday, reaching their highest levels since May 19, as traders assessed the risk of a prolonged disruption to Saudi Arabian oil flows through the Red Sea coast following last week’s drone attack on the kingdom’s east-west pipeline.

Concerns over global oil supplies deepened after Saudi Arabia suspended Yanbu oil loadings and canceled some cargo deliveries to European customers.

U.S. stocks closed lower overnight as investors remained focused on inflation risks, interest-rate expectations and concerns over the U.S. government’s large debt burden.

The benchmark 10-year Treasury yield briefly touched 5.041%, its highest level since July 2007, while oil prices climbed to four-month highs after reports of fresh Houthi strikes on Saudi Arabia.

The S&P 500 fell 0.5% to its lowest closing level in more than a month, while the Dow Jones Industrial Average declined 0.6% and the technology-heavy Nasdaq Composite dropped 0.8%.

European shares slipped to three-month lows on Tuesday as oil-driven inflation fears intensified alongside rising tensions across the Middle East.

The pan-European STOXX 600 declined 0.3%. Germany’s DAX fell 0.2%, France’s CAC 40 slipped 0.3% and the U.K.’s FTSE 100 lost 0.4%.

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