European markets seen mixed as Fed considers interest rate hike


The broad-based S&P 500 fell 0.1 per cent to 2,714.45, while the tech-rich Nasdaq Composite Index also shed 0.1 per cent to 7,354.05.

As long as the wider sense of global market risk appetite remains muted, thanks to trade war fears, the upside potential of the EUR/USD exchange rate is likely to stay somewhat limited.

London's FTSE was down double the rest of Europe as a savage profit warning wiped more than half the value off one of its big tech firms, even as a two-year Brexit transition deal gave the pound its best day in nearly two months against the euro.

FedEx rose 1.0 per cent as it reported earnings of US$3.72 per share, much above analyst expectations.

The greenback's weakness - it fell 10 percent previous year - is at least partly down to USA capital seeking to invest overseas amid robust world growth.

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"There has been the narrative of supposed policy convergence between the ECB and the Fed, but that is just not the reality", said Saxo Bank's head of FX strategy John Hardy. "The markets are completely split on whether the Fed will project three rate hikes this year or four", said Hiroaki Mino, senior strategist at Mizuho Securities. Kathmandu Holdings shares entered a trading halt after the outdoor clothing and equipment retailer said it has agreed to acquire USA -based Oboz Footwear for $60 million.

The rest of Asia had struggled too, though China did manage to eke out some gains as Beijing announced a new economic team.

The pan-European Stoxx Europe 600 index weakened by 0.16 percent.

On Wednesday, the Fed is expected to hike rates for the first time this year and sixth time since it began moving rates up from zero in December 2015.

However, gains were muted as investors braced for new Federal Reserve chair Jerome Powell's first policy meeting starting later in the day and amid concerns that Trump could impose additional protectionist trade measures. "It's because of the underlying strength of the US and global economy". "Gradual and timely are the operative words for policy".

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Investors could well be disappointed if policymakers fail to signal an increased likelihood of interest rates rising a total of four times over the course of 2018.

"The worst case is the '18 and '19 dots both move up - the Fed is now guiding to five hikes in '18 and '19 combined but under this scenario that would shift to seven hikes", they warned in a note to clients.

"Stocks would probably tolerate one net dot increase over 18 and 19, but a bump in both years could create problems". Other social media companies in the USA also finished the day lower on concerns that the government might enact new laws affecting their businesses. The dollar sold off in January and February on bets that trade and budget deficits would pull it down.

Ahead of the US Fed meeting, we have seen strength in US dollar.

The yen was little changed at 106.37 to the dollar, with traders wary of any new developments in a cronyism scandal that has eroded support for Japanese Prime Minister Shinzo Abe. The Russell 2000 index of smaller-company stocks declined 15.49 points, or 1 percent, to 1,570.56. On the day, the metal was down at $1,311.20 per ounce.

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