Title: European Stock Futures Higher; Fed Decision, Bank Earnings in Focus
Jul 27, 2022 01:51AM ET
European stock markets are expected to open higher on Wednesday as investors prepare for a key Federal Reserve meeting and as quarterly corporate reports continue to pile up.
At 02:00 GMT, the DAX futures contract in Germany was trading 0.2% higher, the CAC 40 futures contract in France was up 0.5%, and the FTSE 100 futures contract in the UK was up 0.5%.
Investors await with bated breath to find out how much the U.S. central bank will fight inflation, which is reaching 40-year highs, as it wraps up its two-day policy-setting meeting later in the session.
Markets have largely priced in a 75 basis point hike, with little likelihood of a 100 basis point super-hike.
While central banks globally consistently surprise with hawkish sentiment, we do not expect this to happen as signs of slowing US growth should be enough to hold the hike to 75bp.
More broadly, we believe that extraordinarily large rate hikes are now a thing of the past, and after the July meeting we should be back to the 25 or 50 bps of the past.
On Tuesday, the International Monetary Fund cut its global growth forecasts in its updated World Economic Outlook report, saying that global GDP actually contracted in the second quarter due to declines in China and Russia.
The Fund reduced its forecast for global real GDP growth to 3.2 percent in 2022 from 3.6 percent in April, and growth will slow to 2.9 percent in 2023 from 3.6 percent in April.
These negative sentiments were illustrated by the German GfK Consumer Climate Index for August, which fell to -30.6, retreating from a negatively revised-27.7 in July.