European stocks rise, but investors cautious ahead of Fed meeting

LONDON (Reuters) – European stocks rose slightly on Wednesday after mixed earnings reports, but the resurgence of COVID-19 cases kept investors cautious as they awaited news from the US Federal Reserve.

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 with a yen rise and a weak start to the earnings season.

But the MSCI .MIWD00000PUS World Capital Index, which tracks stocks in 49 countries, rose about 0.1% and mixed corporate earnings saw the main European MSCI index rise about 0.3% to 0757 GMT .MSER.

“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 that are beginning to be reported around the world is sparking an understanding that hopes for a V-shaped recovery are beginning to look like a pie in the sky,” he added.

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

Hong Kong leader Carrie Lam warned that the city was on the verge of a large-scale outbreak and tightened closure measures.

Japan expects the economy to contract this year, with a return to growth next year, four government sources told Reuters.

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.

London Heathrow called on the government to urgently introduce a passenger testing regime, warning that the country risks losing a global “quarantine roulette” game.

The dollar index, which stabilized overnight, continued to decline in early London trading, reaching new two-year lows = USD.

As sentiment soured, high-grade eurozone bond yields fell to their lowest level in more than two months, with the German 10-year yield at -0.511% DE10YT = RR.

The euro, which rebounded last week when European Union leaders agreed on a massive recovery fund across the EU, rose 0.4% to $ 1.1762 EUR = EBS.

Gold, which recovered to a record high of $ 1,980.57 on Tuesday, fell to $ 1,956,3200 XAU =.

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 29 cents, or 0.7%, to $ 43.51 a barrel at 0756 GMT. CLc1 West US Intermediate Crude Oil futures gained 24 cents, or 0.6%, at $ 41.28 per barrel.

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Investors focus 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.

Congress and the US White House are also scrambling to agree on a new deal to replace the improved coronavirus unemployment benefits, due Friday.

Elizabeth Howcroft’s Reports; Editing by Nick Macfie

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