Europe stocks advance, dollar drops ahead of Fed decision

Bloomberg

Stocks in Europe advanced along with US equity-index futures after a mixed session in Asia Wednesday as investors awaited the Federal Reserve’s next move on monetary policy. The dollar headed for a three-month low against a basket of peers.
Financial services and retailers led a broad advance in the Stoxx Europe 600 index. S&P 500 futures rose after the index on Tuesday halted a surge that drove it into the black for 2020. Benchmarks dipped in China and Japan. Hong Kong stocks fluctuated, while South Korea and Australia eked out modest gains. Treasury yields edged lower, and crude oil retreated.
While the Fed is expected to keep its benchmark interest rate unchanged, investors will be looking for reassurance on the central bank’s willingness to keep providing extraordinary support for the economy as it recovers from the coronavirus pandemic. Policy makers may also comment on potentially targeting yields for some Treasury maturities. In grim quarterly assessment, the OECD said the global economy will contract 6% this year.
“Markets have been cautious before the Fed meeting and technical indicators are stretched after the recent powerful rally,” strategists at Credit Agricole CIB led by Jean-Francois Paren said in a client note. “For now, it sounds like yield-curve control is the necessary condition for markets to further rally, but it may not be sufficient by itself as it also highlights the fragility of the system we are now living in.”
Meanwhile, euro-area finance ministers will meet Thursday to discuss the EU’s recovery package and Eurogroup presidency succession.
The Stoxx Europe 600 Index gained 0.6% as of 9:33 am in London and futures on the S&P 500 rose 0.5%. The MSCI Asia Pacific Index also climbed 0.4%.
While the Bloomberg Dollar Spot Index fell 0.5%, the euro rose 0.3% to buy $1.1375 and the yen was at 107.30 per dollar, up 0.4%. The offshore yuan held at 7.0637 per dollar, up 0.2%.
The yield on 10-year Treasuries dipped three basis point to 0.8% and Germany’s 10-year yield dropped one basis point to -0.32%.
While West Texas Intermediate crude dropped 1.9% to $38.21 a barrel, gold was at $1,720.01 an ounce, up 0.3%.