European markets pull back ahead of Fed decision; BMW and VW rally
- The Fed will release new economic and interest rate forecasts, which could indicate that the central bank's officials expect to raise rates by, or even before, 2023.
- The Fed is expected to acknowledge stronger growth, which should put the Fed's easy policies in the spotlight, especially given the new $1.9 trillion in federal stimulus spending.
LONDON — European stocks were lower on Wednesday morning as global investors awaited the outcome from the latest meeting of the Federal Reserve.
The pan-European Stoxx 600 index was down by 0.6% during afternoon trade, with basic resources shedding 2.1% to lead losses while autos continued to rally, climbing 1.7%.
Stocks followed the cautious trend in Asia-Pacific overnight, where markets finished mixed as investors waited for the outcome of the Fed's two-day policy meeting. The Fed will release new economic and interest rate forecasts, which could indicate that the central bank's officials expect to raise rates by, or even before, 2023.
The Fed is expected to acknowledge stronger growth, which should put the Fed's easy policies in the spotlight, especially given the new $1.9 trillion in federal stimulus spending. Investors will also hear from Chair Powell, who is likely to rock the stock and bond markets with his commentary, despite him being unlikely to offer specifics.
Wall Street also opened in negative territory Wednesday ahead of Powell's remarks, with tech stocks leading the way as rising bond yields hit the sector once again. During afternoon trade in Europe, the benchmark U.S. 10-year Treasury note was up sharply at 1.6691%.
Oil prices are also in focus after they fell Tuesday, as traders are worried about fuel demand recovery. That came after more European countries suspended the use of Covid vaccine from Oxford University and drugmaker AstraZeneca, which implied economic recovery from the pandemic may potentially be delayed.
Experts have warned that the suspension, due to concerns over a potential link to reports of blood clots in a handful of cases of vaccinated people, could have far-reaching consequences.
The World Health Organization and European Medicines Agency are carrying out safety reviews of the vaccine, with results expected shortly, but have insisted that available data shows the vaccine is safe and that its benefit outweighs any risks, while the pandemic's impact is still acute in Europe.
Earnings on Wednesday came from Munich Re, while BMW released its annual report. BMW shares rose 5% after stating it would see significant profit growth this year.
Volkswagen shares continued Tuesday's climb to add a further 6.4% to lead the Stoxx 600 after forecasting deliveries and earnings growth at its core brand in 2021.
At the bottom of the European blue chip index, Austrian electricity company Verbund dropped 8.5% after forecasting a fall in profit for 2021.
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