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Dow Futures Flat Amid China Tariff Uncertainty: Fed Meeting in Focus

Wall Street futures edge higher heading into the final Fed policy meeting of the year and the ongoing uncertainty surrounding U.S.-China trade negotiations.

The Wednesday Market Minute

  • Global stocks edge lower ahead of today's Federal Reserve policy meeting and the ongoing uncertainty surrounding U.S.-China trade talks.
  • December 15 tariff decision in flux as reports suggest potential delay while White House advisers suggest the levies will kick in as scheduled unless a phase one agreement is struck.
  • Saudi Aramco shares debut in Riyadh, rising 10% in early trading to value the world's biggest company at $1.88 trillion.
  • UK pound slips after polls suggest Prime Minister Boris Johnson may struggle to win a significant majority in Thursday's general election.
  • Wall Street futures suggest modest moves at the start of trading Wednesday ahead of inflation data at 8:30 am Eastern time and Lululemon Athletica earnings after the close of trading.

U.S. equity futures were mixed Wednesday, while global stocks drifted lower in major markets around the world, ahead of the Federal Reserve's final policy meeting of the year and the ongoing uncertainty surrounding U.S.-China trade negotiations.

The Fed will wrap up its two-day policy meeting later today in Washington with a statement at 2:00 pm Eastern time that is expected to include no changes to its benchmark interest rate of 1.5% to 1.75% and a reiteration of its view that only a "material shock" to the domestic economy would knock it from its current 'wait-and-see' stance on future adjustments. 

Having lowered interest rates three times this year -- the first coming just months after Chairman Jerome Powell had cautioned markets on near-term hikes -- as the U.S.-China trade dispute spiraled into a tit-for-tat tariff war, the central bank's current contentment with the strength of the domestic economy, particularly with respect to jobs and inflation,  seems more broadly connected with progress towards a phase one trade agreement.

However, with the probability of a 2019 fading with each passing day, investor focus has shifted to the President's chances of delaying tariffs on $160 billion worth of China-made goods, many of them consumer products, which are set to kick in on December 15. 

 "The reality is those tariffs are still on the table, the Dec. 15 tariffs, and the President has indicated if the short strokes remaining in negotiations do not pan out to his liking that those tariffs could go back into place,” White House economic adviser Larry Kudlow told an investment conference Tuesday in response to a Wall Street Journal story that suggested the levies could be postponed if the two sides were making solid progress on key aspects of the phase one agreement.

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Wall Street futures suggest little change for the three major benchmarks heading into the opening bell and ahead of the Fed statement later this afternoon, with contracts tied to the Dow Jones Industrial Average indicating a 3 point dip and those linked to the S&P 500 pricing in a 1 point bump higher for the broader benchmark.

The U.S. dollar index was marginally firmer at 97.52 against a basket of six global currencies, while the Fed-sensitive rate on 2-year Treasury note yields drifted 4 basis points higher from Tuesday's low to 1.646% in early European dealing.

European stocks drifted modestly lower at the start of trading in Frankfurt, as well, with the Stoxx 600 marked 0.25% lower by mid-day trading as banks and financial services stocks lead to the downside.

Britain's FTSE 100 was also 0.25% lower in London even as the pound slipped 0.25% from yesterday's levels to 1.3151 after polling indicated that Prime Minister Boris Johnson may struggle to win a convincing parliamentary majority in tomorrow's general election.

Elsewhere, Saudi Aramco's $1.7 trillion IPO -- the biggest in history -- started trading in Riyadh today with shares in the state-backed oil company rising 10% to around $9.40 per share, a move that takes the flotation closer to the government's 2 trillion target.

Global oil prices, meanwhile, traded lower for a second consecutive session as the dollar booked modest gains and traders reacted to yesterday's reading of U.S. crude supplies from the American Petroleum Institute, which indicated a surprise 1.4 million barrel buildup in domestic stockpiles.

Brent crude contracts for February delivery, the global benchmark, were seen 33 cents lower from their Tuesday close and trading at $64.01 per barrel, while WTI contracts for the same month were marked 25 cents lower at $58.89 per barrel.