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- Global shares slowed their rally as investors looked towards the Fed for signals about inflation.
- Gold steadied on Wednesday after declining for three days and falling near month-long lows.
- Oil continued to march higher, boosting global energy prices and stocks.
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Global shares stalled on Wednesday as investors waited for the Federal Reserve's decision on interest rates due later in the day for any indication of what policymakers are thinking about the recent pickup in inflation and what that might mean for the economy.
The Fed will conclude a two-day meeting after which it will release a statement detailing its outlook for economic growth, inflation and how those might affect its multi-trillion dollar asset-purchase program that has supported the financial system throughout the COVID-19 crisis.
Wholesale inflation rose at its fastest pace on record in May, while retail sales – the key measure of consumer spending – missed expectations, according to data on Tuesday. And while consumer inflation moderated a little last month, it still picked up sharply. The Fed has said repeatedly it will tolerate a quicker pickup in prices as it believes these will be mostly transitory, meaning it will have no need to taper its asset purchases more quickly than expected.
The recent readings haven't rattled markets too badly. S&P 500 futures were last 0.07% lower at 04:25 am E.T., while Dow Jones futures dropped by 0.17%. Nasdaq futures were last up 0.07%, indicating the benchmark indices will likely open close to this week's record highs.
"The Fed can still spin that as 'transitory'," Jeffrey Halley, senior market analyst at OANDA said. "Don't hold out your hopes for any hint of we're beginning to think about talking about thinking about tapering either. That might have to wait until December."
US 10-year yields fell ahead of the Fed's announcement and were last at 1.494%, down 0.4 basis points on the day.
Gold steadied on Wednesday after having slid for three consecutive days. The metal was last up 0.04%, trading at $1,858.79 an ounce. Gold tends to perform better in an environment of low rates and a weaker US dollar. A rise in interest rates would likely boost the dollar and undermine investor demand for bullion.
"The recent rise in inflation, ample liquidity conditions and robust economic recovery may support this view, rendering bullion prices vulnerable to further pullback if Fed officials give clarity about the tapering timeline. On the flip side, if the Fed remains dovish and hints at further delay in the debate, gold prices may embrace a relief rebound." Margaret Yang, strategist at DailyFX said.
Asian equities dipped on Wednesday, with the Japanese Nikkei 225 losing 0.51%, Hong Kong's Hang Seng index slipping by 0.65% and China's Shanghai Composite closing 1.07% lower.
Commodities retreated further on Wednesday. Copper was last 0.23% down, while nickel slipped a further 0.45%. Lumber prices had recovered slightly by the end of trading on Tuesday and closed 1.39% up, just above $1,000 per thousand board feet.
European markets had a muted start on Wednesday. Frankfurt's DAX was last down 0.25% and the Euro Stoxx 50 was flat. London's FTSE 100 was up 0.1% after May's inflation reading came in above expectations at 2.1%. The Bank of England had expected a 2% rise as the economy reopened and lockdown restrictions eased, pushing up prices of fuel, restaurant meals and clothing in particular.
Oil continued its march toward the $75 mark, which it last closed above in 2018, boosting global energy stocks. Brent crude was last trading at $74.15 a barrel, adding 0.22%. WTI crude followed suit and was last up 0.19% at $72.26 a barrel.