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European stocks in rally mode as investors wait for Fed decision

MarketWatch
MarketWatch
 2022-01-26
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Passengers walk under a departure display at a terminal of the Franz-Josef-Strauss airport in Munich, southern Germany, on January 25, 2022, amid the ongoing coronavirus Covid-19 pandemic. (Photo by Christof STACHE / AFP) (Photo by CHRISTOF STACHE/AFP via Getty Images) Published Credit: christof stache/Agence France-Presse/Getty Images By christof stache/Agence France-Presse/Getty Images
EUROPE MARKETS https://img.particlenews.com/image.php?url=0if7is_0dwEao2o00

European stocks climbed Wednesday, tracking gains for U.S. equity futures as investors on both sides of the Atlantic waited for the outcome of a Federal Reserve meeting.

The Stoxx Europe 600 index (XX:SXXP) climbed 2% to 469.51, following a 0.7% gain on Tuesday, though the index has lost 1.2% in a week that has seen huge volatility. The German DAX (DX:DAX) and French CAC 40 (FR:PX1) jumped more than 2.5% each, and the FTSE 100 index (UK:UKX) rose 1.8%.

U.S. stocks were poised for a rally, led by the Nasdaq Composite, which Nasdaq Composite fell into correction territory last month — falling 10% from its November all-time high.

European equities have tracked roller coaster action seen recently on Wall Street that has had global ramifications. Driving the wild swings are concerns over a bumpy start to earnings reporting season, geopolitical tensions over Ukraine and ongoing COVID-19 issues, and chiefly apprehension around the potential for rising U.S. interest rates.

A two-day Federal Reserve meeting concludes on Wednesday, and while no tightening is expected, investors will be watching a news conference with Federal Reserve Chairman Jerome Powell closely for comments.

Opinion: Here are the many reasons why the Federal Reserve won’t raise interest rates as much as expected

“The consensus going into tonight’s FOMC meeting is that financial conditions, including the steep correction in US equity markets, have now tightened sufficiently for the Fed to ease up on its hawkish guidance after a long string of hawkish surprises in recent months,” said Peter Garnry, head of equity strategy at Saxo Bank, in a note to clients.

“Market expectations for the Fed funds rate by the end of this year have fallen about 10 basis points from the peak last week, so the market will need some evidence in today’s monetary policy statement and the Fed Chair Powell’s press conference that the Fed recognizes the impact it is having on markets and financial conditions,” said Garnry.

European investors will get a first chance to react to the Fed meeting’s outcome on Thursday morning.

Among the best-performing shares, banks were climbing, with heavily-weighted HSBC

(HSBC) (UK:HSBA) climbing more than 2% and Banco Santander (ES:SAN) (SAN) and Lloyds Banking Group (UK:LLOY) up over 3% each.

Oil majors and tech stocks were also rising, with shares of BP and Shell climbing more than 3% each, ASML Holding (ASML) (NL:ASML) up over 2% and ams (AT:AMS) stock climbing more than 5%.

Energy names rose alongside oil prices (CL00) (BRN00) which pushed back owards a seven-year high amid ongoing fears of a potential Russian attack on Ukraine.

Read: Russia threatens ‘retaliatory measures’ if West continues Ukraine aid

Travel and tourism related stocks were also getting a solid boost on Wednesday, with shares of International Consolidated Airlines (UK:IAG) up more than 7% and InterContinental Hotels (IHG) (UK:IHG) up more than 3%, and TUI (XE:TUI1) (UK:TUI) up more than 5%. Wizz Air shares rose over 2% after the cut-rate airline said it would experience more losses ahead of a recovery driven by U.K. demand.

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