Stocks stable ahead of Fed’s rate decision

investmentnews.com:

Stocks posted small moves in cautious trading as investors looked ahead to the Federal Reserve’s interest-rate decision, bracing for any warnings from Chair Jerome Powell that market expectations of policy easing are overdone.

Europe’s Stoxx 600 index edged higher, with Inditex SA climbing after the Zara owner forecast a stronger gross margin. Entain Plc rallied 7.5% following news that the gambling giant’s chief executive officer is standing down. Contracts for the S&P 500 and the Nasdaq 100 pointed to modest gains on Wall Street. 

The pound fell and UK bonds rose as data showed the economy shrank more than expected in October, figures that prompted traders to ramp up bets on Bank of England interest-rate cuts next year. The dollar and Treasuries edged higher.

Globally, the focus is on the conclusion of the Fed’s final policy meeting of 2023 later Wednesday. While the central bank is widely expected to hold for a third time, the latest U.S. inflation data raised doubts about the likelihood of an aggressive pivot toward policy easing. 

“The market doesn’t agree with the Fed about inflation, so I expect some push back from Powell, but no game changer really,” said Francois Rimeu, a strategist at La Francaise Asset Management in Paris. “The train has been in motion for a month and a half and one better not stand in front of it,” he said, referring to the rally in markets on hopes of easing.

Markets have slightly trimmed bets on Fed rate cuts, with the first one still projected to occur in May. That revision in expectations shows that investors have in part understood the challenges facing the Fed, according to Franck Dixmier, global chief investment officer fixed income at Allianz Global Investors. “As markets recalibrate