European markets could move on the basis of the new US Fed policy

After a few up and down weeks, mostly characterized by declines, European markets are preparing for the outcome of the Fed’s two-day meeting. This week is likely to be an important week for the markets as earnings and monetary policy take center stage.

In addition to the Fed’s policy outlook, European markets will also rely on financial reports from the big names this week. Expected balance sheets include UBS, Unilever, LVMH, Credit Suisse, Deutsche Bank, Daimler, Shell, Barclays, Nestle and Renault, to name a few.

In addition, expected corporate results include Vodafone, Phillips, Faurecia, Ryanair and Julius Baer. Phillips stock took a hit, falling 11% in mid-morning trading on weak quarterly results and forecasts. The drop represents the lowest level in 9 years for the Dutch multinational conglomerate, which largely missed earnings expectations for the second quarter.

European markets started the week mixed, with the Stoxx 600 trading around the flat line for example with low volatility. The pan-European stock index had fallen more than 0.4% in the pre-trade session. Leading the Stoxx 600 is French automotive supplier Faurecia, which climbed more than 7.2% thanks to strong first-half results. In addition, banking stocks were also up 1.8%, while travel and leisure stocks were down 0.7%.

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European markets await Fed deliberations after ECB rate hike last week

The U.S. Federal Reserve’s meeting, which ends Wednesday, is the focus of attention. Economists expect the U.S. central bank to raise interest rates by another 75 basis points. This follows the European Central Bank’s 50 basis point rate hike last week. The ECB’s decision to kick off its own rate hike cycle was larger than previously suggested.

As it stands, the ECB will take into account the economic landscape of the Eurozone before deliberating on another substantial rate hike. Speaking at a press briefing, Austrian central bank governor Robert Holzmann said of the ECB’s potential rate hike in September:

“The economy is going to grow less strongly, the forecasts point in that direction, so that made us somewhat cautious. We will see in the fall what the economic situation is. At that time we can probably decide whether we do another 0.5% or less.”

In addition, Holzmann also added that the European Central Bank is trying to avoid the general public’s expectation of higher inflation across the eurozone.

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Against the backdrop of current European market developments, Asia-Pacific based stocks were mostly lower overnight. Concerns about a global economic slowdown have put a stop to the recent investor shift. Currently, safe haven bonds and the dollar are being bid substantially in the Asia-Pacific region.

Meanwhile, futures stocks were trading slightly lower in the U.S. in the premarket session. This follows a positive week in the U.S. as traders await a series of notable quarterly corporate results and the Fed’s outlook.

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