European stock futures edge lower; caution ahead of Fed decision

© Reuters.

By Peter Nurse 

Investing.com - European stock markets are expected to open marginally lower Wednesday, with investors keeping their powder dry ahead of the U.S. Federal Reserve’s last scheduled rate decision of the year.

At 02:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.1% lower, CAC 40 futures in France dropped 0.2% and the FTSE 100 futures contract in the U.K. fell 0.1%.

Investors received some positive news Tuesday as the latest U.S. consumer prices report showed cooling inflation trends, but the early hefty gains on Wall Street were quickly sold into amid caution ahead of the conclusion of the Fed’s two-day policy-setting meeting, leaving the broad-based S&P 500 index posting gains of only 0.7% at the close.

While the cooling of price rises sets the scene for a step down in the pace of hikes–a 50 basis point rise is widely expected later Wednesday after four consecutive 75 bps increases–there are fears that this will translate into interest rates staying higher for longer.

This leaves the focus on Fed chair Jerome Powell's remarks and on the "dot plot" projections for where interest rates are likely to head in the next few months.

Back in Europe, the region’s main central banks, including the European Central Bank and the Bank of England, are scheduled to release their latest rate decisions on Thursday, with rate hikes of 50 basis points expected from both.

Ahead of this, U.K. consumer prices rose by 0.4% on the month in November, resulting in an annual rise of 10.7%, a small drop from 11.1% the prior month but still pressuring the Bank of England to keep tightening monetary policy.

Eurozone industrial production data for October are due later in the session, and are expected to show a fall of 1.5% on the month as the region suffers from soaring energy prices.

In corporate news, fashion retailer Inditex (BME:ITX) and tourism company Tui (ETR:TUIGn) will be in the spotlight, with both due to release quarterly earnings.

Crude oil prices fell Wednesday, with the recent rally stalling after industry data showed a surprise build in U.S. crude inventories, prompting concerns about demand holding up in the world’s largest consumer.

Data from the American Petroleum Institute indicated U.S. crude stocks rose by 7.8 million barrels last week, a surprise given the outage of the Keystone pipeline had been expected to result in a significant drop in inventories.

Official data from the Energy Information Administration are due later in the session.

By 02:00 ET, U.S. crude futures traded 0.3% lower at $75.16 a barrel, while the Brent contract fell 0.3% to $80.46. 

Both benchmarks had rallied sharply over the past three sessions on a combination of supply worries and expectations that Chinese demand will improve as COVID restrictions are removed.

Additionally, gold futures fell 0.2% to $1,822.25/oz, while EUR/USD traded 0.1% higher at 1.0637.