European stocks look set to resume downward trend on Wednesday amid lingering concerns that higher interest rates could lead to a recession.
Investors await congressional testimony by Federal Reserve Chair Jerome Powell along with remarks by several other Fed officials later in the day for more clues about the Fed’s thinking about inflation and future interest rate hikes.
The dollar and Treasury yields firmed up after Federal Reserve Bank of Richmond President Thomas Barkin said the central bank should normalize policy as fast as feasible without causing undue harm to financial markets or the economy.
Economists expect that the Federal Reserve will deliver another 75-bsis point interest-rate hike in July, followed by a half-percentage-point rise in September.
Asian stocks slipped in volatile trade, while oil prices fell more than 3 percent amid a push by U.S. President Joe Biden to bring down soaring fuel costs.
To curtail rising gas prices, Biden is expected to call for temporarily suspending the 18.4-cents a gallon federal tax on gasoline.
The Japanese yen hit a fresh 24-year low against the dollar after minutes from the Bank of Japan’s April policy meeting showed many board members stressed the need to maintain the central bank’s massive stimulus program to support a still-fragile economy.
Consumer and producer price figures from the U.K. are due later in the session, headlining a light day for the European economic news.
U.S. stocks rebounded on Tuesday as traders returned to their desks after a long holiday weekend.
The S&P 500 added 2.5 percent following the worst week since March 2020 and the Dow climbed 2.2 percent to post its best single-day gain since May 4 while the tech-heavy Nasdaq Composite surged 2.5 percent.
European stocks also rose on Tuesday despite growing worries about ebbing global growth.
The pan-European Stoxx 600 inched up 0.4 percent after hitting a more than one-year low last week. The German DAX edged up 0.2 percent, France’s CAC 40 index gained 0.8 percent and the U.K.’s FTSE 100 rose 0.4 percent.
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