A trader works on the floor of the New York Stock Exchange
by Claude Chendjou
Wall Street is expected to open little changed on Wednesday and European stock markets are also showing slight variations at mid-session, with investors being cautious ahead of the announcement of the first rate cut by the US Federal Reserve (Fed) scheduled for the evening.
New York index futures pointed to a 0.16% opening for Wall Street for the Dow Jones, 0.15% for the Standard & Poor’s 500 and 0.19% for the Nasdaq after a lackluster session. However, the S&P 500 and the Dow Jones set record highs on Tuesday after a series of indicators suggested that the U.S. economy remained robust.
In Paris, the CAC 40 lost 0.47% to 7,481.46 points at around 11:55 GMT. In Frankfurt, the Dax 0.11% and in London, the FTSE 0.64%.
The pan-European FTSEurofirst 300 index fell by 0.39% and the Eurozone’s EuroStoxx 50 by 0.38%. The Stoxx 600 fell by 0.46%, penalized mainly by the new technologies compartment (-0.61%) on profit taking.
After two days of debate by the FOMC, the Fed’s monetary policy committee, the central bank will deliver its rate decision at 1800 GMT, which takes precedence over all other events, including geopolitical risk in the Middle East after the explosion of hundreds of pagers used by Hezbollah in Lebanon, blamed on Israel. Hezbollah leader Hassan Nasrallah is scheduled to speak on Thursday.
Meanwhile, money markets are pricing in a 50 basis point rate cut from the Fed with a 63% probability, according to CME Group’s FedWatch barometer.
“The Fed is highly unlikely to surprise investors by going 25 basis points. We expect the Fed to cut rates by 50 basis points in anticipation of the downtrend in labor market data,” said Sonu Varghese, macro strategist at Carson Group.
Not all observers share this view, however, with the probability of a cut of just 25 basis points by the Fed standing at 37%.
Some analysts also point out that a disproportionate decision by the central bank could scare markets, already worried about the general health of the world’s largest economy.
“(Jerome) Powell will need to provide strong macroeconomic rationales for a half-point move to avoid appearing too sensitive to market expectations for rates,” ING analysts wrote, referring to the Fed chairman, who will speak at 18:30 GMT.
VALUES TO FOLLOW ON WALL STREET
Growth stocks are expected to be mixed ahead of the opening of trading: Apple and Nvidia are down around 0.50, while Microsoft
Separately, the European Union General Court on Wednesday annulled the European Commission’s decision to fine Alphabet subsidiary Google €1.49 billion for impeding competition in online search advertising.
VALUES IN EUROPE
Carmat fell by 12.64% after announcing a new capital increase of 10.3 million euros.
Valneva is up 2.1% after submitting applications to the European Medicines Agency and Health Canada to expand the indication of its chikungunya vaccine.
Campari plunged by 5.36% with the announcement of the surprise departure of its CEO Matteo Fantacchiotti. This weighed on the food and beverage segment (-0.69%) and its competitors Pernod Ricard and Diageo which fell by 1.34% and 1.44% respectively.
Novo Nordisk is down 1.66%. According to Bloomberg, its diabetes treatment Ozempic is “very likely” to be on the list of treatments whose price will be negotiated as part of Medicare coverage in 2027 in the United States.
RATE
Bond yields are broadly stable ahead of the Fed’s decisions. Ten-year Treasuries are up two basis points, at 3.6624%.
The German Bund of the same maturity rose by 2.3 points to 2.171%, after a gain of 2.7 points the day before.
CHANGES
The dollar fell 0.18% against a basket of benchmark currencies in a volatile session on uncertainty over the size of the expected Fed rate cut.
The yen rose 0.58% to 141.57 per dollar amid divergence in monetary policies between the Fed and the Bank of Japan (BoJ), which also meets this week.
The euro advanced by 0.21% to 1.1136 dollars after the final inflation figures for the eurozone for the month of August confirmed a slowdown to 2.2% over one year.
The pound gained 0.44% to $1.3168 after a consumer price indicator showed that British headline inflation was flat in August year-on-year at 2.2%, but that services inflation accelerated to 5.6%. The Bank of England (BoE) is due to make its monetary policy decision on Thursday.
OIL
The oil market is falling again due to a rise in crude inventories in the United States last week which is taking precedence over tensions in the Middle East.
Brent fell 1.23% to $72.79 per barrel and US light crude (West Texas Intermediate, WTI) fell 1.38% to $70.21.
(Written by Claude Chendjou, edited by Blandine Hénault)
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