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Stocks cautious ahead of Fed

Equity markets were subdued on Tuesday as investors positioned themselves ahead of the US Federal Reserve’s (Fed) interest-rate decision later on Wednesday, where a quarter-point cut is widely expected, but the focus will be on how much further policymakers signal rates can fall next year. Wall Street ended mixed and Asian stocks were mostly slightly weaker on Wednesday despite China reporting its fastest consumer price growth in nearly two years, as producer prices continued to fall and deflation concerns lingered. Gold was broadly steady but silver extended its strong rally to a fresh record high, while European indices closed mixed, with Germany’s DAX outperforming after trade data showed exports edging higher in October and the country’s trade surplus widening.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

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Asian equities were mostly slightly in negative territory on Wednesday, retreating as investors grew more cautious ahead of the Fed's announcement later in the day. Hong Kong’s Hang Seng Index was trading flat, while mainland China’s CSI 300 was down 0.1%, after data showed China’s consumer price index (CPI) rose 0.7% year-on-year in November, its fastest pace since February last year and up from a 0.2% increase in October, while producer prices declined 2.2% after a 2.1% fall the previous month, highlighting persistent deflationary pressures. The rebound in headline CPI was driven mainly by higher food prices, particularly fresh vegetables amid weather-related supply shortages, and by strong gains in gold jewellery, while core inflation excluding food and energy remained at 1.2%. Policymakers, who earlier this month identified boosting domestic demand and rebalancing supply as priorities for 2026, are expected to outline growth targets and further easing measures for next year at the upcoming Central Economic Work Conference, as China still appears on track to meet its “around 5%” growth goal for this year. Japanese shares were also dragged lower as persistently firm producer prices stoked speculation that the Bank of Japan could raise rates at its meeting later in December, with sentiment further pressured by rising diplomatic tensions between Japan and China over military activity around Taiwan. Japan’s Nikkei 225 was trading 0.1% lower, while Korea’s Kospi was down 0.2%. Australia’s S&P/ASX 200 was 0.1% weaker, after a hawkish tone from the Reserve Bank of Australia a day earlier.

US stocks mixed before Fed decision

US equities traded cautiously on Tuesday ahead of the Federal Reserve’s interest-rate decision, with the Dow Jones Industrial Average falling 0.4% and the broad S&P 500 edging 0.1% lower, while the technology-heavy Nasdaq 100 gained 0.2%. Markets have largely priced in a further 0.25-percentage-point rate cut, but there is growing concern that the Fed may signal a slower pace of easing for next year. In macroeconomic data, US job vacancies were little changed in October at 7.7 million, broadly matching the level in September but exceeding economists’ expectations, according to JOLTS data released on Tuesday. The report from the Bureau of Labor Statistics showed that layoffs climbed in both September and October, reaching 1.85 million in October, the highest level since January 2023, pointing to growing pressure on parts of the labour market. While private-sector indicators have sent mixed signals, including the worst October for planned layoffs since 2003 reported by outplacement firm Challenger, Gray & Christmas alongside a modest hiring increase in payroll data from ADP, overall conditions appear tight but not collapsing. A clearer picture of US employment trends is expected next Tuesday, when the federal government publishes November unemployment and payroll figures.

Gold steady, silver hits record high

Gold prices were little changed in Asian trading on Wednesday, with spot bullion around USD 4210 per ounce, as traders awaited the Fed's move later in the day. Silver outperformed, with spot prices reaching a record high above USD 62 per ounce after more than doubling so far this year, supported by expectations of tighter supply, stronger industrial demand and its appeal as a lower-priced safe haven than gold. The metal gained further backing after being classified as a critical mineral by the US government, prompting efforts in Washington to secure additional supply. Broader precious and industrial metals, including platinum and copper, also advanced as the US dollar weakened slightly.

German exports edge up, imports fall in October

German exports of goods rose 0.1% in October compared with September on a calendar and seasonally adjusted basis to EUR 131.3 billion, while imports fell 1.2% to EUR 114.5 billion, Destatis reported on Tuesday. The foreign trade surplus widened to EUR 16.9 billion from EUR 15.3 billion in September and EUR 14.6 billion a year earlier, with exports up 4.2% and imports 2.8% higher than in October last year. Trade with EU partners strengthened, as exports to EU member states increased 2.7% and imports 2.8%, whereas trade with non-EU countries weakened, with exports to third countries down 3.3% and imports falling 5.4%. The United States remained Germany’s largest export market despite an export decline of 7.8% on the month, while China was the largest import source, with imports from there decreasing 5.2%. European stock markets were mixed on Tuesday as traders awaited fresh guidance from the US central bank. The Euro Stoxx 50 declined 0.2%, while Germany’s DAX advanced 0.5% and France’s CAC 40 lost 0.7%. The Swiss Market Index slipped 0.3%.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Adobe and Oracle.

Economic data in focus: Bank of England Governor Andrew Bailey speaks (11:45), European Central Bank President Christine Lagarde speaks (11:55), Bank of Canada interest rate decision (15:45), Federal Reserve interest rate decision (20:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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