(Bloomberg) — U.S. equity futures posted small gains as a watchful tone spread across global markets ahead of the Federal Reserve’s interest-rate decision.
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Traders are split on whether the US Federal Reserve will announce a rate cut of 25 or 50 basis points later on Wednesday, with implied odds in the market currently indicating a 55% chance of a major move.
Contracts on the S&P 500 gained less than 0.2%, with the benchmark 0.5% below its July record. Europe’s Stoxx 600 index retreated. The dollar slipped near its weakest levels since January, while Treasury yields were higher.
Investors expect the central bank to ease policy enough to respond to recent signs of weakness in the economy without stoking concerns that conditions are worse than markets estimate.
“If they’re doing 25 basis points at the moment, the likelihood of them getting to a hundred basis points by the end of the year is very slim,” said Justin Onukwuzi, chief investment officer at St. James Place Management. “So if you don’t get to 50, you’re going to get significant moves in the market price.”
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The Japanese yen rose as much as 0.8%, signaling expectations of a narrowing difference in policy between the central bank and the Bank of Japan, which decide rates on Friday.
In corporate news, Alphabet Inc. in US pre-market trading after its Google unit won a competition court battle with the European Union. Shares of Aperol maker David Campari NV fell 6.7% after its CEO resigned after five months on the sidelines.
In the UK, money markets saw modestly less easing after Bank of England services inflation rose to 5.6% in August from 5.2% in July, while the headline figure was slightly above the 2% target. The pound strengthened and UK government bond yields rose after Wednesday’s data.
Forecasters mostly expect the Federal Open Market Committee to cut rates by a quarter point to 5% to 5.25%, though many expect a half-point move. Investors see the odds of even a half-point adjustment.
New quarterly projections in the form of a “dot plot” released at the end of the central bank’s two-day meeting will provide further insight into borrowing costs and the economy’s path forward. President Jerome Powell will also hold a press conference.
“Given the market noise, I now expect them to go to half a point,” said Francois Rimeau, strategist at La Francaise Asset Management. “Powell’s comments, the dot plot, the economic forecast, all of that would be at least as important as the cut.”
Oil fell after two days of gains as signs of higher U.S. stockpiles echoed concerns that Middle East tensions could escalate further.
Highlights of this week:
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Central Bank rate decision, Wednesday
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UK price decision, Thursday
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US US conf. Board leading index, initial jobless claims, US existing home sales, Thursday
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FedEx earnings, Thursday
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Japan price decision, Friday
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Eurozone consumer confidence, Friday
Some key movements in the markets:
Shares
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S&P 500 futures were up 0.1% at 6:13 a.m. New York time
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Nasdaq 100 futures rose 0.2%
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Futures for the Dow Jones industrial average rose 0.2%
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The Stoxx Europe 600 fell 0.4%
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The MSCI World Index was little changed
Coins
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.2% to $1.1135
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The British pound was up 0.4% at $1.3219
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The Japanese yen rose 0.5% to 141.64 per dollar
Cryptocurrencies
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Bitcoin fell 0.7% to $59,703.66
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Ether fell 2.2% to $2,293.11
Bonds
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The yield on 10-year Treasuries rose two basis points to 3.66%
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Germany’s 10-year yield rose three basis points to 2.17%
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Britain’s 10-year yield rose four basis points to 3.81%
materials
This story was produced with the help of Bloomberg Automation.
–With assistance from James Hirai, Winnie Hsu, Margarita Krakosian, and Sujata Rao.
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