European stock markets are switching between gains and losses on Wednesday amid contradictory signals from the trade front. There are reports that Washington may delay additional tariffs on Chinese exports to the U.S. slated for Sunday. Meanwhile, China’s former commerce minister said that the world’s two largest economies won’t disengage from each other due to the ongoing tensions caused by the trade war. Also, investors express a cautious tone ahead of the FOMC meeting results due later today.
In individual stocks, Credit Suisse are trading nearly 0.5% lower after the lender said it expects a return on tangible equity above 8% in 2019, revised down from its previous target of 10-11%. Also, the Swiss banking giant has cut its profitability outlook for 2020. Meanwhile, Tullow Oil shares extend the recovery, gaining 6.6% on Wednesday after a plunge by 70% at the start of the week. JD Sports Fashion stocks are losing over 10% after the retail group’s shareholder Pentland said it has reduced its stake, selling nearly 24 million shares.
Against this backdrop, UK’s FTSE 100 sheds 0.03 per cent to 7211, Italy’s FTSE MIB adds 0.16 per cent to 23,159, France’s CAC 40 gains 0.03 per cent to 5,850, and German DAX 30 rises by 0.42 per cent to 13,126. U.S. stock index futures are little changed ahead of the official open in Wall Street as investors prepare for the Federal Reserve’s latest decision on monetary policy. Jerome Powell is expected to signal the central bank will take appropriate measures to keep liquidity high. As a reminder, in October, the Fed decided to cut short-term lending rates to a range of 1.50% to 1.75%.
In currencies, the dollar is mostly higher against the majors but the trading activity is fairly muted in general as market participants refrain from taking decisions ahead of the Federal Reserve decision. Despite no surprises are expected from the central bank this time, there is a possibility that the statement and Powell’s press-conference will lift short-term volatility in the markets. The greenback could rise further against most rivals should the FOMC members express a more hawkish and optimistic tone on the economy and its policy. In this scenario, EURUSD could accelerate its downside correction and get back below the 100-DMA around 1.1060. Once below, the pair may target the 1.10 figure but the potential bearish impetus will hardly be strong enough to send the euro below this level.
Brent crude struggles to hold above the $64 handle, with prices remaining stable not far from 2.5-month highs registered late last week. Overnight, the API report showed that US crude oil stockpiles increased by 1.4 million barrels while gasoline stocks rose nearly 5 million barrels. The estimate has disappointed market participants but the downside pressure was limited as the market is still supported by the recent OPEC+ decision to make deeper production cuts and extend the deal into the end of the first quarter 2020. On the other hand, failure to cling to the $64 figure could send Brent marginally lower in the short term.
Nathan Lambert, Head of Global FX Analytical Department