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Top 5 Things to Know in the Market on Wednesday

Investing.com -- The Fed will likely leave interest rates unchanged and keep its forward guidance neutral at the end of its two-day policy meeting. The European Union is set to present plans to make Europe climate-neutral by 2050, with far-reaching consequences for polluting industries both at home and abroad. Saudi Aramco (SE:2222) gets off to a flying start on the Riyadh exchange with a little help from its local friends, but Chevron (NYSE:CVX) is taking a massive hit on its oil and gas assets. Here's what you need to know in financial markets on Wednesday, 11th December.

1. Fed to stand pat

The Federal Reserve’s two-day policy-meeting winds up at lunchtime, with the Fed’s statement due at 2 PM ET (1700 GMT) and Chairman Jerome Powell’s press conference set to start half an hour later.

No change in interest rates is expected, so the market’s focus will be on Powell’s guidance, which is unlikely to have changed much from October, when he indicated that policy will remain on hold barring any marked downturn in the economy. Nothing of the sort was in evidence in last week’s labor market report, which showed the unemployment rate dipping to 3.5% and average hourly earnings ticking up.

Consumer inflation data for November, which are due for release at 8:30 AM ET, are unlikely to have any impact on the Fed’s decision-making, at least today.

2. A Tale of Two Oil Majors

Saudi Aramco (SE:2222) stock soared 10% on its market debut, confirming its status as the world’s most valuable company with a valuation of $1.88 trillion by the time it was suspended on the Tadawul exchange in Riyadh.

Reports point to aggressive buying in the secondary market by local individuals and funds, aimed at validating Crown Prince Mohammed bin Salman’s aspirations for a $2 trillion valuation. The company pulled planned international listings after institutional investors across the world baulked at the Prince’s demands.

For a more reliable indicator of the market outlook for oil and gas companies, investors may be better advised to look at Chevron's (NYSE:CVX) $10 billion write-down of its assets after the close on Tuesday. Most of that was caused by its Marcellus and Utica shale gas assets, which have been hit by a sustained glut in production in the region. It also wrote down the value of its Kitimat LNG project in Canada and its Big Foot oil project in the Gulf of Mexico.

3. Stocks set for mixed open on confused trade backdrop

U.S. stock markets are set to open mixed against a backdrop of conflicting remarks about the likelihood of more U.S. import tariffs coming into effect at the weekend. Various reports suggested that the U.S. is considering delaying the move, which would avert the most market-negative scenario in the short term but still leave the possibility hanging over markets in the longer term.

However, White House economic advisor Lawrence Kudlow told Bloomberg on Tuesday that the tariff increase is “still on the table”.

By 6:20 AM ET (1120 GMT), Dow futures were down 50 points, or 0.2%, while S&P 500 Futures were down 0.1% and Nasdaq 100 futures were just in green territory. Trading is likely to stay quiet until the Fed’s statement and press conference.

Yogawear maker Lululemon Athletica is due to release earnings for the three months to October, in an otherwise quiet day for corporate reports.

4. Sterling slips as final polls show a tighter race

The British pound recovered after falling nearly a cent against the dollar as a final opinion poll suggested that the Conservative Party’s lead had narrowed substantially in the last two weeks of the campaign.

YouGov’s second Multilevel Regression Poll, which uses broader samples and deeper analytics than most other polls, suggested that the Tories were still on course to win a majority at tomorrow’s general election, albeit the base case estimate of a 28-seat majority means that another ‘hung’ parliament with no overall majority is now within the margin of error.

Sterling had briefly broken through $1.32 for the first time since March immediately before the poll was published. It dropped as far as $1.3112 in response, before recovering to $1.3152 by 6:09 AM ET

5. EU to present 'Green New Deal'

The European Union will set out plans to make Europe climate-neutral by 2050, an objective that is likely to be cemented in law over the five-year term of the new Commission under Ursula von der Leyen.

Various elements of the package are likely to put pressure on European industries – notably utilities and transport-related companies - to accelerate their efforts to cut or neutralize carbon emissions, while the Commission will also confirm plans to introduce a “carbon border tax” that will penalize imports produced under laxer environmental standards.

As such, the measures carry the seed of future trade disputes, given the U.S.’s decision to withdraw from the Paris Climate Accord and the continuing reliance of China on coal-fired power.

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