Futures rise ahead of Fed rate decision

The Federal Reserve will release details on its latest attempt to quell inflation through tighter monetary policy at 2 p.m. ET. Investors expect a 0.75 percentage point increase against the Fed’s target rate, the highest level since 1994. The central bank had previously oriented a 0.5 percentage point increase, but rate expectations had edged higher after data showed inflation Growth is at its fastest rate in more than four decades.

Tech stocks are poised to open higher. Nasdaq-100 futures were up 1% and Dow Jones Industrial Average futures were up 0.7%.

U.S. Treasuries steadied after sliding in recent weeks in a sell-off that pushed yields to their highest levels in more than a decade. The yield on the 10-year note fell to 3.371% from 3.482% on Tuesday.

European stocks and eurozone periphery government bonds rise after ECB says it will hold special meeting Wednesday to discuss chaos in the region’s bond market. Investors sold Southern European government debt at the end of the year after the ECB unveiled plans to cut its bond-buying program and raise interest rates to curb inflation.

Yields on 10-year Italian government bonds fell from 4.111% to 3.806% Tuesday. Yields move inversely with bond prices. They also fell in Greece, Spain and other euro area members considered vulnerable due to higher borrowing costs.

Stoxx Europe 600 rose 1.2%, led by shares of banks and insurance companies. Shares of Italian banks, which own a significant amount of government bonds, have been damaged by falling debt.

Intesa Sanpaolo

and

UniCredit

among the best performing stocks in the European market on Wednesday.

The euro gained 0.6% to trade at $1.0481. The dollar, meanwhile, fell 0.6 percent against the WSJ Dollar Index, which tracks the currency against a basket of its currencies.

“They want to make sure financial conditions don’t deteriorate too much,” said Willem Sels, chief investment officer at HSBC Private Banking and Wealth Management. He said the meeting signaled that the ECB was ready to bring into the buffer market sooner than investors expected.

Cryptocurrencies continue to decline. Bitcoin dropped 4.2% to $21,080, sending the digital currency into its ninth consecutive daily loss. Ethereum drops 6.4%, lasts a move in cryptocurrency That has taken a toll on companies including Coinbase Global, which is laying off nearly a fifth of its employees, and Celsius Network, a crypto lender that is currently considering restructuring options. Shares of Coinbase fell 2.5% in pre-market trading.

Behind the crypto sell-off and recent turmoil in traditional financial markets, is the possibility of the Fed changing gears in an attempt to limit decades-high inflation. For years after the 2008-9 financial crisis, stocks, bonds and more speculative assets rose as central banks pushed borrowing costs down in the face of inflation and economic growth.

The pandemic, with central banks and governments facing the economic impact with unprecedented fiscal stimulus measures, has fueled that upward trend. Rising inflation has prompted the Fed and many of its partners to relax easy money policies, and the assets that have benefited the most from that are suffering the consequences.

Dorian Carrell, a fund manager at

Schroders,

The Fed’s guidance on the direction of interest rates on Wednesday is more important to markets than the size of the rate hike, said the Fed’s guidance. Interest rate uncertainty has led to volatility in equity and credit markets, he said.

Edit & Amplify
Yields on 10-year government bonds in Italy were steady at 4.111 percent on Tuesday. An earlier version of this article incorrectly stated a yield of 4.067%. (Fixed June 15th)

Write to Joe Wallace at [email protected]