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The Wednesday Market Minute

  • Global stocks weaker ahead of today's Fed rate decision, with sentiment clouded by reports of tension in U.S.-China trade talks and a profit warning from Federal Express.
  • European stocks slip from late-September highs, with Germany's trade-sensitive DAX leading decliners, amid reports of China pushing back on key issues in talks with Washington.
  • Global oil prices were little-changed, with support coming from API data showing a surprise 2.15 million drawdown in domestic crude stocks and yesterday's move from OPEC to scrap its April meeting, raising the prospect of extending production cuts into the second half of the year.
  • Dow futures suggest a modest opening gain slip ahead of the Fed rate decision at 2:00 pm Eastern Time and Chairman Jerome Powell's press conference 30 minutes later.

Market Snapshot

Global stocks traded mixed Wednesday as investors awaited a key decision on interest rates and bond sales from the U.S. Federal Reserve and reacted to reports of potential tension in U.S.-China trade talks.

The Fed will announce its rate decision at 2:00 pm Eastern Time, with Chairman Jerome Powell set to speak with reporters 30 minutes later. Investors are expecting no change in the Fed's key policy rate -- which sits in the range of 2.25% to 2.5% -- but rather a signal of slower increases in the near-term, following four hikes last year, and an easing in the pace of sales of bonds sitting on the Fed's $3.8 trillion balance sheet, which act as de-facto interest rate increases in the broader economy.

Markets generally trade cautious ahead of key Fed statements, and with U.S. stocks sitting on year-to-date gains of around 13%, investors haven't appeared keen to reach for risk this week, particularly in light of reports that suggest China is pushing back on various elements in trade talks with Washington ahead of meetings next week in Beijing that are expected to include Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin.

Amid the Fed uncertainty and trade talk headlines, Asia stocks were mixed across the overnight session, with Japan's Nikkei 224 rising 0.2% by the close of trading while the region-wide Asia ex-Japan benchmark slipped 0.14% as stocks in China and Australia eased in the wake of a series of weaker-than-expected readings for U.S. manufacturing.

U.S. equity futures were modestly softer at the start of European trading, with contracts tied to the Dow Jones Industrial Average indicating a 25 point gain and those linked to the S&P 500 suggesting a modest 2.1 point bump for the broader benchmark.

Equity sentiment was also held down by the second profit warning in three months from global package delivery group Federal Express (FDX - Get Report) , which posted weaker-than-expected third quarter earnings and cut its full-year profit forecast on weaker world economic growth concerns.

European stocks slid from late September highs in the opening minutes of trading, with the Stoxx 600 benchmark falling 0.3% in Frankfurt and Britain's FTSE 100 largely flat. Trade-sensitive stocks on Germany's DAX performance index fell 0.71%. 

Bayer AG (BAYRY shares fell nearly 12% in the opening minutes of trading in Frankfurt to change hands at €62.83 each after a second U.S. jury in San Francisco found its 'Roundup' weed killer to have caused cancer for plaintiff Edwin Hardeman.

BMW Group AG (BMWYY shares tumbled 4% after the luxury carmaker warned of a "significant decline" in 2019 profits and unveiled a $13.6 billion cost-cutting program.

Global oil prices were little-changed at the start of the European session, with traders citing yesterday's surprise 2.13 million barrel drawdown in U.S. crude stocks, reported by the American Petroleum Institute, and ongoing OPEC production cuts as market supporters.

Record U.S. production, which the Energy Department pegs at around 12 million barrels per day, has kept a cap on gains, but oil has nonetheless surged nearly 40% since hitting a multi-year low on Christmas Eve. The EIA will publish official crude stock data for the week ending March 15 at 10:30 am Eastern Time.

Brent crude contracts for May delivery, the global benchmark for oil prices, were marked 17 cents higher from their Monday close and changing hands at $67.78 per barrel while WTI contracts for April delivery, which are more tightly linked to U.S. gasoline prices, were seen 2 cents lower at $59.27 per barrel, which is still the highest level since November 12.

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