European stocks rise as investors wait for Fed meeting

LONDON (Reuters) – European stocks rose on Wednesday, but a resurgence of COVID-19 cases kept investors cautious as they awaited news of the latest US Federal Reserve policy meeting.

FILE PHOTO: People pass the offices of the London Stock Exchange Group in the city of London, Great Britain, on December 29, 2017. REUTERS / Toby Melville

Wall Street closed lower on Tuesday and negative sentiment continued throughout the Asian session, with Japan’s Nikkei falling one yen higher and a weak start to the corporate earnings season.

The MSCI .MIWD00000PUS world capital index, which tracks stocks in 49 countries, held steady at 1007 GMT, while mixed corporate earnings pushed MSCI’s main European index down a quarter of a point .MSER.

The STOXX 600 in Europe rose 0.1%, the DAX in Germany fell 0.1% .GDAXI and the CAC 40 in France gained 0.7% thanks to a series of better results than those feared, including the group. Deluxe Heavyweight Kering (PRTP.PA) .FCHI.

Spanish bank Santander (SAN.MC) reported a record loss in the second quarter, while Germany’s Deutsche Bank offered a slightly improved outlook.

“Global stock markets appear to be beginning to falter a bit as the latest earnings figures begin to paint a picture of a global economy that could begin to face a difficult time in the coming weeks and months,” wrote Michael Hewson, analyst. market chief. at CMC Markets UK.

“The resurgence of coronavirus cases beginning to be reported around the world is prompting the understanding that hopes for a V-shaped recovery are starting to look like a pie in the sky.”

Deaths from coronavirus in the United States recorded their biggest one-day increase since May on Tuesday, with the increase in infections this month forcing some states to make a U-turn in reopening their economies.

Asia and Europe have also been hit by new waves of COVID-19 infections, with several countries imposing new restrictions and Britain imposing 14-day quarantines on travelers from Spain.

Global airlines cut their forecasts for a coronavirus recovery on Tuesday, saying it would take until 2024, a year longer than expected, for passenger traffic to return to pre-crisis levels.

The dollar index fell in early London trading, hitting two-year lows before firming slightly = USD.

As sentiment soured, high-grade euro zone bond yields fell to their lowest level in more than two months. The German 10-year yield was -0.505%, with a low of -0.521% DE10YT = RR.

“It should be clear to investors that the virus itself will not go away,” said David Riley, chief investment strategist at BlueBay Asset Management.

“It’s something that is going to be there having an impact on behavior, having an impact on economic activity for the rest of this year and much of next year.”

Gold paused in its recovery, 0.2% to $ 1,954.33 an ounce.

Oil prices rose after a surprise drop in US crude oil inventories was enough to offset concerns about US fuel demand.

Brent LCOc1 crude futures rose 58 cents, or 1.3%, to $ 43.80 a barrel at 1028 GMT. CLc1 West US Intermediate Crude Futures gained 43 cents, or 1.1%, at $ 41.47.

Chart: Fed balance sheet – here

Investors are also keeping a close eye on the United States Federal Reserve as its two-day meeting begins.

The Fed is expected to sound reassuringly accommodating in its policy review later in the day and perhaps open the door to greater tolerance for inflation, something that dollar bears believe could crush real yields and further sink the economy. coin.

Slideshow (2 images)

Investors are also targeting the US Congress and the White House as they face new measures to replace the improved coronavirus unemployment benefits due Friday.

BlueBay’s Riley said the market consensus was that a $ 1 trillion support package will be agreed.

“I think it’s kind of minimal and it won’t be the last thing that will be needed,” he said.

Elizabeth Howcroft’s Reports; Nick Macfie and David Goodman Edition

Our Standards:Thomson Reuters Trust Principles.