European stocks and US futures slipped on Tuesday with central bankers on either side of the Atlantic poised to raise rates to their highest levels in 15 years.
The region-wide Stoxx Europe 600 traded 0.7 per cent lower after data showed the French economy expanded 0.1 per cent in the last quarter of 2022 despite a 0.9 per cent slump in household consumption. London’s FTSE 100 fell 0.8 per cent.
Contracts tracking Wall Street’s benchmark S&P 500 slipped 0.3 per cent while those tracking the tech-heavy Nasdaq 100 lost 0.5 per cent ahead of the New York open.
Federal Reserve officials gathering for their first policy meeting of the year are widely expected to implement a quarter percentage-point increase on Wednesday, in a move that would lift the fed funds rate to a new target range of 4.5 per cent to 4.75 per cent.
Such a rise would mark a return to a more normal tempo of policymaking after the Fed last year delivered four consecutive 0.75 percentage-point increases before decelerating to 0.5 percentage points in December. Though inflation remains far from the Fed’s 2 per cent target, December’s level was the lowest since October 2021.
Trading in US equities is likely to be relatively subdued in the run-up to the Fed’s announcement. Tuesday “might be interesting but will ultimately be irrelevant,” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “Whatever the market does will either be undone or reinforced by what the Fed says Wednesday.”
Investors are likely to focus on fourth-quarter results out on Tuesday from oil major ExxonMobil — which posted a record profit of $55.7bn last year — fast food outlet McDonald’s and semiconductor group Advanced Micro Devices, among others, in another busy week for corporate results.
A measure of the dollar’s strength against a basket of six other currencies rose 0.1 per cent while US government bonds rallied. The two-year Treasury yield, which is particularly sensitive to interest rate expectations, fell 0.03 percentage points to 4.23 per cent. Bond yields move inversely to prices.
In Asia, Hong Kong’s Hang Seng index and China’s CSI 300 fell 1 per cent, South Korea’s Kospi lost 1.7 per cent, and Japan’s Topix fell 0.4 per cent.
Prices for Brent crude, the international oil benchmark, fell 0.9 per cent to $84.16 a barrel.
