European Stock Futures Higher; Fed Decision, Bank Earnings in Focus

European stock markets are expected to edge higher at the open Wednesday as investors prepare for a key Federal Reserve meeting while quarterly corporate earnings continue to flood in.

At 02:00 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.2% higher, CAC 40 futures in France climbed 0.5%, and the FTSE 100 futures contract in the U.K. rose 0.5%.

Investors are waiting with bated breath to see the extent the U.S. central bank will go to combat inflation running at 40-year highs as it concludes its two-day policy-setting meeting later in the session.

Markets have largely priced in a 75 basis point hike, with only a small chance of a supersized 100 bp raise.

“While central banks worldwide have consistently surprised on the hawkish side, we do not expect this to be the case … as signs of a U.S. slowdown should be enough to keep its increase to 75bp,” said Matthew Ryan, Head of Market Strategy.

“More generally, we think outsize rate increases are now a thing of the past, and we should revert to the 25 or 50 bp of the past after the July meeting.”

The International Monetary Fund cut its global growth forecasts on Tuesday in an update of its World Economic Outlook, saying world GDP actually contracted in the second quarter due to downturns in China and Russia.

The fund cut its prediction for global real GDP growth to 3.2% in 2022, from April’s 3.6% forecast, while 2023 growth will slow to 2.9% from the April estimate of 3.6%.

This negative sentiment was illustrated by the German GfK consumer climate index for August falling to -30.6, a retreat from the negatively revised -27.7 in July.

Back in Europe, it’s a busy day for corporate earnings.

Credit Suisse will be in the spotlight after it named asset management expert Ulrich Koerner as its new chief executive, with the Swiss banking giant also announcing a strategic review on the back of posting a hefty 1.59 billion Swiss franc ($1.65 billion) second-quarter loss.

By contrast, Deutsche Bank posted a better-than-expected 51% rise in second-quarter profit as investment banking revenues rose, while UniCredit said it would complete a proposed share buyback after a surprise profit rise in the second quarter.

Earnings from the likes of Daimler, Danone, Carrefour , and Airbus will also be in focus Wednesday.

Oil prices steadied Wednesday as concerns over weakened U.S. demand were offset by industry data showing a healthy drawdown of stocks by the largest consumer in the world.

Data from the American Petroleum Institute showed U.S. crude stocks fell by about 4 million barrels last week, four times bigger than the decline expected, while gasoline inventories fell by 1.1 million barrels, compared with expectations for a build of 3.5 million barrels.

The official data from the Energy Information Administration is due later in the session.

By 02:00 AM ET, U.S. crude futures traded 0.8% higher at $95.75 a barrel, while the Brent contract rose 0.5% to $99.97.

Additionally, gold futures fell 0.1% to $1,716.50/oz, while EUR/USD traded 0.3% higher at 1.0145.

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