Yahoo Finance Stocks rally as Fed to raise rates for first time since 2018
European stocks pushed higher on Wednesday as investors awaited a widely anticipated decision by the US Federal Reserve on interest rate policy.
In London, the FTSE 100 (^FTSE) closed 1.6% higher on the day, while the CAC (^FCHI) gained 3.7% in Paris, and the Frankfurt DAX (^GDAXI) advanced 3.8%.
“All eyes are firmly focused on the Federal Reserve meeting later today – the first in four years, where an interest rate hike is expected,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said.
“Should this fail to materialise, further volatility across European and the UK market should be expected. It’s also worth keeping in mind the Russian invasion of Ukraine means the frequency and extent of rate rises may not be as high as previously predicted.”
The positive mood also comes amid fresh signs that a negotiated deal to end the conflict in Ukraine may be a step closer. Sentiment was lifted as President Zelensky said peace talks are starting to "sound more realistic" while conceding that Ukraine will not join Nato.
Travel and leisure stocks, autos, and financials are leading the gains in Europe, with all major bourses in the green.
Meanwhile, traders will also be keeping their eyes on the prospect that Russia might default on a bond payment.
A $117m (£90m) interest payment is due on a US dollar bond, which Russia has said it will pay in roubles – this would start the clock ticking on a potential default. However, it will still have a 30-day grace period to make the coupon payments.
Read more: Bank of England set to raise interest rates for third time since pandemic
Across the pond, the S&P 500 (^GSPC) rose 1.3% and the tech-heavy Nasdaq (^IXIC) was 2.2% up at the time of the European close. The Dow Jones (^DJI) gained 0.9%.
On Tuesday, US markets managed to finish the session sharply higher, with the S&P 500 finishing ahead for the first time since last Wednesday.
Later in the session, the latest US retail sales report for February will be revealed. Expectations are for sales to rise by 0.4% in February.
US retail sales saw a big rebound in January after a decline of 1.9% in December. January retail sales showed that, despite weak consumer confidence, spending rebounded at its fastest rate in 10 months, rising by 3.8%, well above expectations of 2%.
The biggest gains were in online sales, as well as furniture, autos and building materials.
Read more: What does the EU's backtrack on bitcoin mining ban mean for crypto investors?
Asian shares rose on Wednesday, with the Nikkei (^N225) climbing 1.6% in Japan, while the Hang Seng (^HSI) rocketed more than 9% in Hong Kong after plunging earlier in the week, and the Shanghai Composite (000001.SS) climbed 3.5%.
The rally came after Beijing pledged policies to boost financial markets and stimulate economic growth.
“Chinese stocks had been hit by fears that the economy would suffer from renewed lockdowns and disruption to the electronics manufacturing hub of Shenzhen, further deterioration in the real estate sector amid bad debts, and the country potentially providing support to Russia in its war on Ukraine," Russ Mould, investment director at AJ Bell.
"These factors added to existing pressures around tighter regulatory interference on various sectors and whether Chinese companies should still be allowed to list their shares on overseas markets.
“Now Beijing has vowed to introduce policies that benefit markets although the big unknown is still whether the country will side with Russia."
Watch: How does inflation affect interest rates
