European Stocks Rise Amid Fed Decision Expectations, Earnings Glut

By Scott Kanowsky

Investing.com -- European stocks opened higher on Wednesday, as traders await a key Federal Reserve policy decision and digest a fresh batch of corporate earnings.

At 03:36 AM EST (0736 GMT), the pan-European STOXX 600 rose by 0.42%, the DAX in Germany traded up by 0.43%, the U.K.'s FTSE 100 jumped by 0.42%, and the CAC 40 in France increased 0.35%.

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 at Ebury.

“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.”

Also weighing on sentiment was a cut in global growth forecasts from the International Monetary Fund on Tuesday. The IMF said it expects 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 feeling 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.

Meanwhile, company results in Europe poured in on Wednesday.

Credit Suisse Group AG (SIX:CSGN) 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. Shares in the lender rose by 1.47%.

In Germany, Adidas AG (ETR:ADSGN) slashed its annual sales and profit outlook, citing the impact of strict COVID restrictions in China and fears of a slowdown in consumer spending. Shares in the athletic apparel maker fell to near the bottom of the STOXX 600.

By contrast, Deutsche Bank AG (ETR:DBKGn) posted a better-than-expected 51% rise in second-quarter profit as investment banking revenues rose. However, shares fell in early European trading.

UniCredit SpA (BIT:CRDI) said it would complete a proposed share buyback after a surprise profit rise in the second quarter. Shares in the Italian bank surged by 5.99%, hovering near the top of the STOXX 600.

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.

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

By 02:25 AM EST, U.S. Crude Oil WTI Futures was 0.76% higher at $95.70 a barrel, while the Brent contract rose 0.47% to $99.93.

Additionally, gold futures fell 0.3% to $1,717.15/oz, while EUR/USD traded 0.32% higher at $1.0146.