Europe markets head for higher open with Fed in focus

Jenni Reid

LONDON — European stocks are heading for a higher open Wednesday, rebounding as investors await commentary on the inflation and interest rate outlook from the U.S. Federal Reserve.

The regional Stoxx 600 index closed in the red on Tuesday, snapping a strong run that has lasted since the global sell-off across Aug. 1-5.

France’s CAC 40 was last seen nudging 7 points higher to 7,490, according to IG data, with the U.K.’s FTSE 100 up 4 points and Germany’s DAX up 10 points.

Stoxx 600 index.

It is a quiet week on the European data front, save for flash purchasing managers’ index figures for the euro area on Thursday.

Attention is instead turning stateside, with the release of minutes from the Federal Reserve out Wednesday, ahead of Fed Chair Jerome Powell’s speech at the closely watched central bank symposium at Jackson Hole on Friday.

An interest rate cut by the Fed in September has long been fully priced in by markets, but sentiment is shakier over whether that will be by 25 or 50 basis points. According to CME’s FedWatch tool, probability stands at 67.5% for the former and 32.5% for the latter.

Powell is not expected to give firm guidance on the path ahead, but his words will be parsed for a more hawkish or dovish tone.

His comments come amid debate over the health of the U.S. economy, after U.S. retail sales for July and weekly initial jobless claims beat expectations.

“It’s not so far away from Goldilocks, if you think about it, we have inflation which continues to come down, economic growth is still decent — with signs of weakness but still holding up — earnings season was pretty good, and the Fed is very close to starting cutting rates,” Charles-Henry Monchau, chief investment officer at Bank Syz, told CNBC’s “Squawk Box Europe” on Wednesday.

“So if you put all of this together, the conditions for equity markets are still quite good. There are a lot of risks out there, but the headline is still decent,” Monchau said.

Asia-Pacific markets were broadly lower in Wednesday trade, following a losing session on Wall Street.

Source : cnbc