US equity futures and global stocks witnessed a rebound on Wednesday as investors prepared for the Federal Reserve’s last policy decision of the year. The consensus among analysts suggests that the Fed is likely to announce a 25 basis point cut in rates. By 8 AM, S&P 500 futures climbed by 0.3%, trending towards the potential for their 58th record high of the year, while Nasdaq 100 futures increased by 0.2% following declines in both indices on Tuesday. Noteworthy pre-market movers included Tesla, which saw a 2.5% decrease after hitting an all-time high, and Nvidia, which rose 2.7%. Global equities also showed positivity, with European indexes like the Stoxx 600 and Asian markets snapping a losing streak. US Treasuries experienced a yield increase, with 10-year Treasury yields rising to 4.41%, and oil prices saw an uptick.
In corporate news, Boeing’s stock gained around 1% after the company resumed production of several aircraft models post-strike. Other significant premarket changes included Corvus Pharmaceuticals, which rose 10% ahead of updates from an early trial of a new eczema treatment, and General Mills, which dropped 3% after announcing it would aim for organic sales at the lower end of its previous forecasts. Heico Holdings and Ollie’s Bargain Outlet saw declines and increases, respectively, driven by earnings reports and upgrades. Meanwhile, the context of Fed’s anticipated rate cut piqued investor interest in what 2025 may hold amidst slower-than-expected inflation and a resilient economy.
Market analysts agreed that while a Fed interest rate cut was almost certain, the focus would be on the future outlook and whether the Fed plans to continue reducing rates at previous rates. Expectations are that the current dot plot will show a trajectory of rate cuts that may be less aggressive than originally projected due to decelerating inflation. Florent Wabont, an economist at Ecofi Investissements, indicated that the decision-making process might not align with market expectations, highlighting the importance of Fed Chair Jerome Powell’s communication. Some analysts felt that the market might be underestimating how dovish the Fed could turn relative to reducing rates.
In the European markets, stocks posted gains and snapped a four-day losing streak as signs of easing inflation pressures emerged. Dominant sectors included energy, banking, and technology, with Commerzbank benefitting from strengthened stake from UniCredit. Japanese automakers gained interest following a merger announcement between Nissan and Honda. Both companies are exploring a partnership as part of their strategies to navigate challenges in the automotive industry.
Asian stocks achieved modest gains on Wednesday, primarily led by rebounds in Chinese and South Korean shares, as investors awaited the US Federal Reserve’s decision. While the MSCI Asia Pacific Index rose slightly, Japanese shares dipped amid caution ahead of the central bank’s choices. The Hang Seng and Korea’s Kospi indexes reflected the positive sentiment ahead of policy decisions from the Federal Reserve and the Bank of Japan. U.S. Treasuries remained stable, with traders focusing on potential implications of the anticipated Fed rate cut on future inflation dynamics.
Additionally, key data releases highlighted the ongoing impacts of inflation and government policy decisions. UK inflation rose even as it drifted above the Bank of England’s target, while U.S. data reflected resilience in housing starts and permits amidst potential economic fluctuations. Attention remains on the upcoming Fed meeting and the explicit guidance provided by Chairman Powell during the press conference that follows, as traders and investors assess the potential for future economic policies under the incoming administration led by Donald Trump. With geopolitical tensions and domestic economic indicators in play, market volatility is expected ahead of significant central bank pronouncements.
