Yahoo Finance FTSE and Wall Street higher ahead of Fed interest rate decision
How major markets are performing on Wednesday
European stock markets pushed higher on Wednesday, while Wall Street followed its lead, as traders awaited the final interest rate decision of the year from the US Federal Reserve.
In London, the FTSE 100 (^FTSE) was almost 0.3% by the end of the day, buoyed by a weaker pound which fall on the back of the UK economy shrinking more than expected in October. Meanwhile the CAC (^FCHI) gained 0.1% in Paris, and the Frankfurt DAX (^GDAXI) was flat.
The S&P 500 (^GSPC) rose 0.2% by the European close, and the tech-heavy Nasdaq (^IXIC) was 0.3% higher. The Dow Jones (^DJI) was up just 0.1% in New York. It also came as US producer price inflation dipped below 1%, according to the latest data from the Bureau of Labour Statistics.
The producer price index for final demand rose by 0.9% in the year to November, down from a 1.2% year-on-year rise in October. The drop was driven by cheaper energy products.
On a monthly basis, the PPI index was unchanged in November, following a 0.4% decrease in October and a 0.4% rise in September.
Read more: Fed expected to hold rates steady as Wall Street looks for signs of cuts in 2024
The Federal Reserve is widely expected to hold rates steady today. It last hiked rates in July and has elected to keep interest rates unchanged for the past two policy meetings in a range of 5.25%-5.50%, a 22-year high. Wall Street is pricing in an average of 100 basis points of cuts next year.
"After pushing up to new record highs yesterday the DAX and CAC 40 ended up closing lower on the day, as caution set in ahead of today and tomorrow’s final central bank meetings of 2023, starting with the Federal Reserve later this evening," Michael Hewson, chief market analyst at CMC Markets UK, said.
"US markets, on the other hand continued their recent optimistic bias with both the Dow and S&P 500 closing at fresh 2023 highs, after US inflation slowed modestly to 3.1%, even as bond yields edged higher."
Read more: Bank of England poised to leave interest rates on hold
Hewson added: "When the Federal Reserve kept rates unchanged back in November for the second meeting in a row there was still the distinct possibility that the final meeting of 2023 would provide the possibility of one more rate rise to round off the year in line with Fed policymakers dot plot forecasts of 5.6%."
Meanwhile, UK gross domestic product (GDP) contracted by 0.3% on a monthly basis, according to the latest data from the Office for National Statistics (ONS). This followed growth of 0.2% in September as economists had expected a contraction of 0.1%.
Read more: Pound falls against the dollar after weak UK GDP data
Services output fell by 0.2% in October 2023, driven by a fall in information and communication, and was the main contributor to the fall in growth in GDP. Production and construction also fell sharply, by 0.8 % and 0.5% respectively.
The news meant interest rate cuts from the Bank of England are more likely next year. Financial markets are now predicting that there will be 95 basis points, which would bring rates down to 4.25%.
Sterling (GBPUSD=X) fell 0.3% against the US dollar on Wednesday, trading as low as $1.2521, while it dropped 0.25% against the euro (GBPEUR=X) at €1.1606.
UK 10-year gilt yields fell to their lowest since 18 May at 3.904%, down 6bps on the day.
Watch: How does inflation affect interest rates?
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