Fed time; Trade optimism; Markets in wait
1. Fed time: Wednesday belongs to Federal Reserve Chair Jerome Powell.
The Fed’s latest rate decision will post at 2:00 p.m. ET, followed by a press conference.
Investors are looking for Powell to deliver a solidly dovish message, following his remarks two weeks ago that the Fed would act as appropriate to sustain the economic expansion in the United States.
That triggered a stock rally, and now markets want additional details. Expectations for a rate cut in July are now at nearly 84%, according to the CME’s FedWatch tool.
Setting the stage are comments from European Central Bank President Mario Draghi, who said Tuesday that he was open to boosting monetary stimulus if economic conditions in Europe don’t improve.
That sent European stocks rallying while pushing the euro lower against the dollar.
President Donald Trump responded to Draghi’s comments on Twitter, saying that a weaker euro makes it “unfairly easier” for Europe “to compete against the USA.”
The president has repeatedly bashed Powell — his pick to lead the US central bank — because the Fed raised interest rates last year just as Republicans were goosing the economy with tax cuts.
On Tuesday, Trump even declined to rule out demoting Powell, instead saying that he would watch the chairman closely. Investors are watching, too.
2. Trade optimism: Driving investor sentiment in the meantime is Trump’s announcement Tuesday that he will have an “extended” meeting with Chinese President Xi Jinping at the G20.
American and Chinese negotiators are set to resume talks on Wednesday ahead of the sit-down.
The talks are a positive development, even if it’s “only the start of the process of resolving a host of thorny issues,” political consultancy Eurasia Group said in a note Tuesday.
The group says there’s a 40% chance that a truce will be hammered out at the G20 meeting next week. That would mean that both sides agree to continue trade talks and find a solution on Huawei, the Chinese tech giant facing a US export ban.
Want more markets? Watch CNN’s “Markets Now” digital live show Wednesday at 12:45 p.m. ET.
3. Stocks in wait: Stocks in Asia rallied on optimism about trade and more easy money. The Hang Seng leaped nearly 2.6%, while the Shanghai Composite rose nearly 1%. The Nikkei increased 1.7%.
European markets dipped on the heels of big gains. Britain’s FTSE 100 shed 0.3%, while France’s CAC 40 fell 0.2% and Germany’s DAX dropped 0.1%.
US stock futures are flat ahead of news from the Fed. The Dow and Nasdaq both closed up 1.4% on Tuesday, while the S&P 500 rose 1%.
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4. Coming this week:
Wednesday: Fed decision and press conference, earnings from Oracle and Barnes & Noble
Thursday: US leading indicators, Bank of England rate decision, earnings from Darden, Kroger and Red Hat
Friday: US existing home sales, Markit flash US manufacturing PMI
