Global stocks edged higher on Wednesday as oil prices eased and government bond yields stabilised ahead of the US Federal Reserve’s interest rate decision later in the day.
MSCI’s global equities index rose 0.1% after falling in the previous two sessions, while its Asia-Pacific index excluding Japan climbed 0.6%, ending a four-day losing streak.
European markets also opened higher, with the pan-European STOXX 600 up 0.3%, while S&P 500 futures gained after the US benchmark fell for a second straight session on Tuesday.
The moves came as the 10-year US Treasury yield held around 5% after briefly rising above the threshold on Tuesday for the first time in three years and reaching its highest level since 2007.
The Federal Reserve is due to announce its policy decision later Wednesday, followed by a press conference with Chair Kevin Warsh.
“It’s a question of credibility for him to hike right now. If he doesn’t hike this evening, it could be a problem for the Fed’s credibility, its independence and for the stock market,” said Michaël Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management in Paris.
“It’s also a question of guidance and a reaction function from the Fed. Today, it’s very difficult to describe exactly what is a reaction function of the Fed.”
Markets are pricing in a 92.5% probability of a 25-basis-point rate increase, according to CME Group’s FedWatch tool, up from 61.2% a week ago.
The US dollar index eased 0.1% to 99.6 after approaching a two-week high, while the yen held around 155 per dollar ahead of the Bank of Japan’s policy decision on Friday.
Markets expect the BOJ to raise rates to their highest level in 31 years, while the Bank of England is widely expected to leave rates unchanged on Thursday despite expectations of a hike later this year.
Central banks are weighing tighter monetary policy as disruptions to fuel supplies caused by the Middle East conflict raise concerns over energy-driven inflation.
Oil prices retreated on Wednesday, with Brent crude futures falling 0.6% to US$108 a barrel after rising 2.9% in the previous session. Reports that Saudi Arabia was offering additional crude cargoes via Oman helped ease concerns over the scale of supply disruptions.
UBS Global Wealth Management analysts said sterling could strengthen if the Bank of England signals further rate hikes, while the yen could weaken if the BOJ’s message falls short of market expectations.
Digital assets remained under pressure following Tuesday’s sharp selloff. Bitcoin fell 0.6% to US$75,423 after dropping 4% a day earlier, while ether slipped 0.8% to US$2,388 after falling 6.3% on Tuesday.
Reuters
