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Markets brace for Fed rate rise

Expectations of a Federal Reserve rate increase on Wednesday kept investors cautious after rising energy costs drove US Treasury yields above 5% on Tuesday. Wall Street’s major indices closed lower, while Asian equities were mostly gaining on Wednesday as lower oil prices brought some relief. Investors will also assess US retail-sales data ahead of the Fed’s decision, which is widely expected to deliver a quarter-point increase in borrowing costs.

  • Data
  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

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The yield on ten-year US Treasury bonds rose above 5% for the first time since 2007 on Tuesday as investors anticipated further Federal Reserve monetary tightening. 30-year yields climbed to 5.4%, while two-year yields reached 4.7%, their highest level since mid-2024. On Wednesday, US Treasury yields were trading slightly lower across the curve. Markets expect the Fed to raise its policy-rate range by 0.25 percentage points to 3.75-4.00% on Wednesday amid persistent, energy-driven inflation. Rising government borrowing, heavy corporate debt issuance to finance AI infrastructure and concerns over the Middle East conflict have increased the compensation investors demand to hold longer-dated bonds.

Asian stocks rise ahead of Fed decision

Asian equities edged higher on Wednesday, with Japan’s Nikkei 225 up 0.4% and Korea’s Kospi gaining 0.8%. Australia’s S&P/ASX 200 rose 0.3%, mainland China’s CSI 300 gained 0.4% and India’s Nifty 50 added 0.7%, while Hong Kong’s Hang Seng Index was essentially flat. Brent crude eased 0.7% to USD 107.94 a barrel after rising roughly 20% this month, although supply risks linked to the Iran war and disruption around the Strait of Hormuz remain. The US Dollar Index edged 0.04% lower to 99.60 points. Gold rose 0.8% to around USD 4330 per ounce, while bitcoin fell 2.2% to around USD 75,900.

US stocks fall before Fed decision

US equities declined on Tuesday as higher oil prices and caution ahead of the Federal Reserve’s monetary-policy decision weighed on sentiment. The Dow Jones Industrial Average fell 0.6% to 52,093.11 points, while the S&P 500 dropped 0.5% to 7585.73 points and the Nasdaq 100 lost 0.7% to 28,938 points. Semiconductor shares partly recovered from Monday’s AI-related sell-off, whereas Coinbase declined around 10% after the US Senate blocked broad cryptocurrency-regulation legislation.

Euro-area trade surplus widens

The eurozone’s goods trade surplus widened to EUR 14.2 billion in July, from EUR 7.2 billion in June and EUR 10.7 billion a year earlier, Eurostat reported on Tuesday. Exports increased 9% year-on-year to EUR 276.0 billion, while imports rose 7.9% to EUR 261.8 billion. European stock indices closed lower on Tuesday, with the Euro Stoxx 50 down 0.4%, Germany’s DAX off 0.2%, France’s CAC 40 down 0.3% and the Swiss Market Index down 0.5%.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: UK Consumer Price Index (08:00), Italian Consumer Price Index (10:00), euro-area manufacturing production (11:00), Bundesbank monthly report (12:00), US retail sales (14:30), European Central Bank President Christine Lagarde speaks (19:00), Bank of Canada monetary policy meeting minutes (19:30) and Federal Reserve interest rate decision (20:00).

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Editor: Alessandro Fezzi
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