Markets are waiting on the Fed as it looks to support the US economy in the absence of political agreement on a stimulus package
London (AFP) - World stocks were short on inspiration Wednesday as investors trod a cautious path, with their immediate focus on the Federal Reserve’s latest meeting.
The dollar was down against its main rivals awaiting news from the US central bank due 1800 GMT.
Oil prices were holding gains upwards of two percent awaiting data on crude stockpile levels in the United States, an indicator of demand in the world’s biggest economy.
“Among OPEC members, there is increasing awareness of a deteriorating demand outlook,” said Edoardo Campanella, economist with UniCredit Bank, noting the “uncertain path” of the virus.
Wall Street and the tech heavy Nasdaq posted modest gains minutes after opening while London stocks slid a half percent as investors nervously eyed news that British inflation hit a near five-year low at 0.2 percent in August on state stimulus measures for the virus-hit hospitality sector.
Possible deflation, which risk further job losses at a time when UK companies are shedding hundreds of thousands of jobs on virus fallout, is also a major concern for the eurozone.
The bloc’s Frankfurt and Paris stock markets were essentially flat two hours from the close after the Organisation for Economic Co-operation and Development cautioned that the pandemic-induced global recession will not be as deep as expected due to countries’ efforts to contain economic fallout from Covid-19.
- ‘Keeping powder dry’ -
“Investors may be keeping their powder dry ahead of the latest meeting of the US Federal Reserve with the central bank widely expected to hold rates near zero,” noted Russ Mould, investment director at online broker AJ Bell.
Global markets have enjoyed something of a respite from the roller-coaster ride seen earlier in the month, which saw a rout of previously surging technology firms, as vaccine hopes and upbeat economic data offset worries about fresh virus spikes and new containment measures.
With US lawmakers unable to agree on a new stimulus package – despite the first running out last month, leaving millions of Americans struggling – the onus has fallen on the US central bank to do much of the leg work in supporting the world’s top economy.
And while officials are not expected to unveil any fresh measures, having already indicated they will keep interest rates near zero for the foreseeable future, boss Jerome Powell’s post-meeting comments will be pored over for an idea about the outlook and clues to future policy.
There was little reaction to the World Trade Organization’s decision to uphold a Chinese complaint over additional US tariffs on around $250 billion of imports, which was slammed by Washington.
Meanwhile, US Democratic House Speaker Nancy Pelosi on Tuesday announced a new attempt to break weeks of deadlock with the White House and Republican-controlled Senate on passing a new stimulus package.
But with both sides miles apart on their proposals – Democrats are aiming for $2 trillion and Republicans want to spend half of that – there is little expectation a deal can be made any time soon.
- London tech float -
In London, British online retailer The Hut Group – which sells cosmetic and nutrition products across the world – launched the capital’s biggest stock market flotation so far this year.
THG, whose portfolio includes beauty website Lookfantastic and nutrition brand Myprotein, said it has sold 35 percent of its stock, in new and existing shares, in an Initial Public Offering valuing it at £5.4 billion ($7.0 billion).
The company has seen its popularity surge this year as the coronavirus lockdown sparked a global online shopping boom.
- Key figures around 1345 GMT -
New York - Dow Jones: UP 0.3 percent at 28,086.80
London - FTSE 100: DOWN 0.6 percent at 6,067.24 points
Frankfurt - DAX 30: FLAT percent at 13,208.43
Paris - CAC 40: DOWN 0.7 percent at 5,031.47
EURO STOXX 50: DOWN 0.4 percent at 3,319.44
Tokyo - Nikkei 225: UP 0.1 percent at 23,475.53 (close)
Hong Kong - Hang Seng: FLAT at 24,725.63 (close)
Shanghai - Composite: DOWN 0.4 percent at 3,283.92 (close)
Euro/dollar: UP at $1.1858 from $1.1847 at 2100 GMT
Pound/dollar: UP at $1.2978 from $1.2886
Euro/pound: UP at 90.68 pence from 90.61 pence
Dollar/yen: DOWN at 104.93 yen from 105.78 yen
West Texas Intermediate: UP 2.6 percent at $39.23 per barrel
Brent North Sea crude: UP 2.3 percent at $41.47 per barrel