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(Sharecast News) - European stocks rebounded from a three-month low on Wednesday, though gains were limited as investors braced for a crucial Federal Reserve policy decision, with the central bank almost certain to hike interest rates to curb rising inflation.
Helping sentiment during the session was a 2.5% slump in the price of Brent crude to $106.02 a barrel, after oil prices surged to a four-month high of $108.75 the previous session.
Meanwhile, bond yields pulled back across the globe after hitting multi-year and multi-decade highs earlier in the week. Yields in Germany, Italy, Spain and the UK were all firmly lower in particular.
The Stoxx 600 was up 0.5% at 637.09, with moderate gains across the continent's major indices, after falling to its lowest closing price since 12 June the day before.
"It has been a solidly risk-on day in stock markets, which looks rather odd given all the angst around tonight's Fed decision," said Chris Beauchamp, chief market analyst at IG.
"Perhaps it will be yet another run of 'sell the rumour, buy the fact', though any longer-term bounce depends on how the Fed frames tonight's move."
Traders have priced in a rate hike from the Fed at 93%, with new central bank chief Kevin Warsh under the spotlight not only from markets, which expect an increase, but also from US President Donald Trump, who is demanding lower rates.
Rising inflation, fuelled by surging energy and food costs due to Trump's war of choice on Iran, may well force the hand of policymakers.
In economic news, eurozone industrial production fell 0.1% month-on-month in July, matching the 0.1% decline recorded in June, though not as steep as the -0.2% expected.
In equity news, French semiconductor materials outfit Soitec saw shares jump after a JP Morgan upgrade to 'overweight' from 'neutral', with the bank doubling its price target.
Others in the chip sector were also performing well, recovering after a sell-off in recent sessions on AI slowdown concerns, with ASM International, Infineon Technologies and ASML all in demand.
Barratt Redrow jumped as the UK housebuilder on higher forward sales, despite a weak market outlook. The news lifted rivals Taylor Wimpey, Vistry, Bellway and Persimmon.