European markets are anticipated to open slightly lower on Wednesday, with attention turning to the much-awaited Federal Reserve's decision on interest rates. The consensus among analysts is that the Fed will cut rates by a quarter-point today. Investors will be scrutinizing the accompanying statement and updated economic forecasts, especially the outlook on future rate movements.
Hopes for multiple rate cuts next year are waning due to a robust labor market and persistent inflation pressures. Meanwhile, the Bank of Japan and the Bank of England are conducting their final policy meetings of the year, and neither is expected to alter their key rates.
The market focus is likely to shift from the rate decisions themselves to the broader economic messages and the implications for inflation and growth in the coming year, particularly as the United States adjusts to the policies of the incoming administration.
In other economic updates, the U.K. will release its consumer and producer price indices along with housing market data. Additionally, Eurostat will announce November's final consumer price inflation figures for the euro area, with expectations set at 2.3%, a rise from October's 2.0%.
Asian markets displayed mixed performance, and the yen struggled to benefit from the previous day's minor recovery. Oil and gold prices remained within tight trading ranges.
The Canadian dollar weakened to its lowest point since March 2020, influenced by dovish comments from Bank of Canada Governor Tiff Macklem and uncertainty in domestic politics. In Brazil, emergency interventions were made on Tuesday to support the weakening currency, with over $3 billion sold in local markets.
On Wall Street, U.S. stocks declined overnight. The robust retail sales data for November has intensified discussions on the Fed's policy trajectory for 2025. The Dow Jones Industrial Average fell by 0.6%, marking its ninth consecutive loss, the longest streak since 1978. The tech-centric Nasdaq Composite decreased by 0.3%, and the S&P 500 fell by 0.4%.
In Europe, stocks generally dropped on Tuesday, affected by political instability in Germany and France. The STOXX 600 index for the region decreased by 0.4%, the German DAX slid 0.3%, the UK's FTSE 100 dropped 0.8%, and France's CAC 40 saw a slight rise of 0.1%.
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