Stocks around the world fell on Wednesday as caution reigned ahead of an expected U.S. Federal Reserve interest rate rise later in the day that may see rates go up to their highest since the global financial crisis.
European stocks fell as much as 0.3% in early trading, with indexes in Germany and France slipped 0.2% and 1.1% respectively.
The Fed‘s July decision will be announced later on Wednesday following a two-day meeting. The benchmark rate is expected to be lifted to a range between 5.25% and 5.5% – roughly the highest level since the approach to the 2007-2009 financial crisis and recession.
Still, money market traders are split on the odds of another increase later in the year.[FEDWATCH]
“The 25 basis point rise is a done deal. The expectation is that they will signal a pause of the next meeting,” said Luca Paolini, chief strategist at Pictet Asset Management.
“The risk is that the Fed, looking at market bullishness, may not want to sound too dovish – they may want to keep the door open for more rate hikes.”
The MSCI world equity index, which tracks shares in 47 countries, was flat.
On Wall Street, S&P 500 e-minis futures were flat.
In Britain, shares of lender NatWest fell as much as 3.6% after CEO Alison Rose quit on Wednesday after discussing former Brexit party leader Nigel Farage’s relationship with NatWest with a BBC journalist. Fellow UK lender Lloyds (LON:LLOY) slipped as much as 4.8% as its half-year profit missed expectations.
The yield on benchmark 10-year Treasury notes rose to 3.8905%, compared with its U.S. close of 3.912% on Tuesday.
The two-year yield, which rises with traders’ expectations of higher Fed fund rates, was last at 4.8703% compared with a U.S. close of 4.893%.
