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European Stocks Waver Ahead of the Fed

European stocks edged lower Wednesday after a positive session in Asia where markets welcomed upbeat comments on trade from President Trump and the prospect of fresh central-bank stimulus for the eurozone.

Europe’s equity benchmark, the Stoxx Europe 600, dropped 0.1% in early trade, with regional indexes switching between minor gains and losses.

Meanwhile, Chinese equities led regional gains in Asia. By early afternoon, Hong Kong’s benchmark Hang Seng Index rose 2.4% to a one-month high, while the Shanghai Composite was up 2.2%. Other major indexes in Japan, Singapore, South Korea and Taiwan gained more than 1%.

Australian stocks reached their highest level in over 11 years, with the country’s ASX 200 benchmark moving within 3% of 2007’s best-ever finish.

Major indexes around the world surged yesterday, while bond yields dropped, after European Central Bank President Mario Draghi signaled the ECB could cut rates and expand its bond-buying program in an effort to shore up eurozone inflation.

On Tuesday, Mr. Trump and Chinese President Xi Jinping agreed to meet at next week’s Group of 20 summit in Japan, sparking hopes for a trade truce and driving up U.S. indexes near their record highs.

“The upcoming meeting in Japan is unlikely to deliver a major breakthrough for the U.S.-China trade relationship, but having the two sides talk is better than no talk,” said Steven Leung, executive director of institutional sales at UOB Kay Hian.

Still, today’s focus remained squarely on the U.S. Federal Reserve, which is set to publish a statement today outlining its position on future rate cuts.

ING Senior Rates Strategist Benjamin Schroeder said investors hoping for a July rate cut will likely be disappointed. Chairman Jerome Powell will instead aim to strike a balance between avoiding committing to any near-term loosening, while hinting at the possibility of future cuts, Mr. Schroeder said.

Further complicating the situation, Mr. Trump suggested Tuesday that he would consider demoting Mr. Powell if he isn’t satisfied with the meeting’s outcome. Mr. Trump has called repeatedly on the Fed to lower interest rates to boost the economy.

In commodities, global oil benchmark Brent crude rose 0.5% to $62.44 a barrel, while gold slipped 0.2% to $1,348 a troy ounce.

The WSJ dollar index, which measures the currency against a basket of its peers, was flat.

Source: Dow Jones

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