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Futures Edge Higher Ahead of Fed’s Rate Decision

On Wednesday, US stock index futures climbed, as investors were keeping an eye on the meeting of the Federal Reserve to see how much interest rates would be increased for quelling inflation.

Aggressive Hike Expected

Previously, investors had been pricing a rate hike of 50 basis points, but after the higher-than-expected US consumer price index (CPI) data last Friday that resulted in a sell-off in global markets, the predictions have changed. Now, bets are on a hike of 75 basis points by the Fed.

Moreover, markets were in for a surprise when the European Central Bank (ECB) announced an unscheduled and rare meeting of its Governing Council that sets the interest rate. According to the ECB, the meeting was to discuss the sell-off recently seen in the government bond markets. The announcement gave a 1% boost to European stocks.

Traders are betting that the chances of a 75 basis points hike are 94%, which had been 8.2% a week earlier. If the Federal Reserve does decide to go through with such an aggressive hiking measure, its policy rate for the short-term would rise to a range of 1.5% to 1.75%.

The central bank will issue a statement at 1800 GMT and Jerome Powell, the Chairman of the Federal Reserve, will also conduct a press conference at 1830 GMT.

Global Equities are on a Decline

The aggressive monetary tightening policies of central banks, the concerns about soaring inflation, the Russia and Ukraine conflict and the COVID-19 restrictions in China have wreaked havoc on global equities this year.

On Monday, the benchmark US S&P 500 index reported a more than 20% decline since its recent record closing value on January 3rd, thereby confirming a bear market. By 1050 GMT, there was a 0.36% increase in Dow e-minis or 108 points and a 0.54% or 20 points increase in S&P 500 e-minis. Likewise, there was also a 0.67% increase in Nasdaq 100 e-minis, or about 75.25 points.

In individual stocks, there was a 3.6% increase in Baidu Inc.’s shares in the US in pre-market trading. This happened after reports that the China-based search engine giant may be selling off the controlling stake it has in iQIYI Inc. If the deal goes through, the valuation of iQIYI Inc. would reach $7 billion.

There was a 0.6% rise in Qualcomm after it was able to win its legal battle against the antitrust regulators of the EU. A fine worth 997 million euros or $1.05 billion had been imposed against the company four years ago.

Crypto Still in Turmoil

The cryptocurrency market continued to face turmoil, as Bitcoin extended its losses to shed 6.9%, which brought it to lows seen in December 2020. Therefore, stocks of companies in the crypto space, including Riot Blockchain, Coinbase Global and Hut 8 Mining were all in a decline as well.

All eyes are now on the Fed meeting to see how much the interest rate hike would be and what hints the chairman may provide about future hikes of the central bank.

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