European stock futures lower; caution ahead of Fed announcement

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At 02:10 ET (06:10 GMT), the DAX futures contract in Germany traded 0.1% lower, CAC 40 futures in France dropped 0.1% and the FTSE 100 futures contract in the U.K. fell 0.1%.

The major European indices closed higher Tuesday, boosted by the decision of the People’s Bank of China to cut a short-term lending rate, indicating a willingness by the country’s authorities to stimulate the second-largest economy in the world, which has struggled to generate a sustained post-COVID recovery.   

However, the tone is more cautious Wednesday even as Tuesday’s soft U.S. inflation data largely removed any bets that the Fed officials would agree to a rate hike later in the session.

A pause in the U.S. central bank’s year-long rate hiking cycle is largely baked in now, and the uncertainty revolves around the language used to guide expectations of future action as well as the new quarterly economic projections. 

Policymakers may well signal more rate increases are still to come once they take time to assess how the economy is coping with the more than 500 basis points of combined hikes already announced.

Back in Europe, the U.K. economy grew by 0.2% on the month in April, an improvement from the 0.3% drop the prior month, but industrial production fell 0.3% in the same time period.

There’s also euro-area industrial production for April to digest later in the period, a day before the European Central Bank meets to make its latest monetary policy decision.

Oil prices edged higher Wednesday, stabilizing after the previous session’s strong gains as traders await the outcome of the Fed’s latest meeting and government data on U.S. crude stockpiles.

By 02:00 ET, U.S. crude futures traded 0.3% higher at $69.69 a barrel, while the Brent contract climbed 0.4% to $74.66.

Both benchmarks climbed more than 3% on Tuesday, boosted by China’s central bank attempting to stimulate its economy by cutting a short-term lending rate. Soft U.S. inflation data also raised the possibility that the U.S. central bank will pause its rate-hiking cycle at its meeting later in the session.

Data from the American Petroleum Institute showed that U.S. crude inventories unexpectedly grew by about 1 million barrels last week, putting the focus on government data due later in the day.

Additionally, gold futures rose 0.1% to $1,960.15/oz, while EUR/USD traded 0.1% lower at 1.0782.