Global stocks steady as investors brace for Fed meet, tariff deadline

NEW YORK: Equities were modestly higher on Wednesday while the US dollar advanced as investors digested the latest economic data and waited for the Federal Reserve's policy announcement, which will be followed by key corporate earnings reports due later on Wednesday. Investors appeared to shrug off the latest trade news. US President Donald Trump on Wednesday announced a 25% tariff on US imports from India starting on Aug. 1 and that the country would also face an unspecified penalty on the same day. This was after talks between the US and China concluded without any major breakthroughs.

In the latest data reports, US economic growth rebounded more than expected in the second quarter, but that grossly overstated the economy's health as declining imports accounted for the bulk of the improvement and domestic demand rose at its slowest pace in 2-1/2 years. And on the labor side, US private payrolls increased more than expected in July, according to the ADP National Employment Report. Private payrolls rose by 104,000 jobs last month after a revised 23,000 decline in June. Economists polled by Reuters had forecast private employment increasing 75,000 following a previously reported drop of 33,000 in June. Next up is the Fed's policy statement at 2:00 p.m ET/ 1800 GMT, with the central bank widely expected to keep rates on hold despite pressure from the White House to lower borrowing costs. While investors are anxiously awaiting earnings reports from Microsoft and Meta after the bell, Paul Eitelman, global chief investment strategist at Russell Investments, said the better than expected results in the reporting season so far, and the morning's economic data were sending positive messages to the market.

"What we're seeing broadly is a message of resilience where healthy corporate earnings are helping to reinforce and stabilize the labor market. We're just not seeing a lot of layoffs in that healthy fundamental backdrop and the stable labor market is helping to support consumer spending," said Eitelman.

"None of it's particularly strong but it's fine and chugging along. Markets broadly seem like they're in a handoff phase from that risk aversion back in April to more of a fundamental resilience and momentum driven market." On Wall Street at 11:11am the Dow Jones Industrial Average fell 38.20 points, or 0.09%, to 44,594.79, the S&P 500 rose 3.99 points, or 0.07%, to 6,375.41 and the Nasdaq Composite rose 57.69 points, or 0.27%, to 21,155.98. MSCI's gauge of stocks across the globe fell 0.20 points, or 0.02%, to 935.60 while the pan-European STOXX 600 index rose 0.01%. In treasuries, US 10-year Treasury yields rose as investors digested details of a Treasury refunding plan along with the economic data. The yield on benchmark US 10-year notes rose 3.6 basis points to 4.364%, from 4.328% late on Tuesday while the 30-year bond yield rose 3.3 basis points to 4.901% from 4.868% late on Tuesday. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 2.5 basis points to 3.9%, from 3.875% late on Tuesday. In currencies, the dollar advanced against major peers on Wednesday following better-than-expected US GDP data and as investors awaited the outcome of the Federal Reserve's policy meeting later in the session. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.56% to 99.44. The euro was down 0.59% at $1.1478 while Sterling weakened 0.47% to $1.3285 and the Canadian dollar weakened 0.34% versus the greenback to C$1.38 per dollar. Against the Japanese yen, the dollar strengthened 0.36% to 148.97. With the Bank of Japan expected to keep policy unchanged on Thursday, investors are waiting for any clues in its commentary as to when the next rate increase will come as a trade deal between Japan and the U.S. cleared the way for the bank to resume rate hikes.

Oil prices were higher as investors awaited developments on Trump's tighter deadline for Russia to end the war in Ukraine and his tariff threats to countries that trade its oil. US crude rose 0.75% to $69.73 a barrel and Brent rose to $72.98 per barrel, up 0.65% on the day. Elsewhere in commodities, gold prices fell as the US economic data reinforced expectations that the Federal Reserve will hold interest rates steady at its upcoming meeting, while also increasing the likelihood that rate cuts may be pushed back for the remainder of the year. Spot gold fell 0.78% to $3,300.49 an ounce. U.S. gold futures fell 0.79% to $3,297.90 an ounce. Copper declined 1.1% to $9,690.00 a tonne.

Reuters