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Global Stocks Waver Ahead of Fed Minutes

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05/22/2019 | 08:12am EDT

By Nathan Allen

U.S. stocks were set to open slightly lower Wednesday as markets awaited the release of Federal Reserve minutes that could shed light on officials' views on lowering interest rates.

Futures pointed to opening losses of 0.2% for the S&P 500 and 0.1% for the Dow Jones Industrial Average.

In Europe, the Stoxx Europe 600 was down 0.2% in midday trade, with the U.K's FTSE 100 up 0.3% and Germany's DAX up 0.1%.

That followed a broadly positive session in Asia where Hong Kong's Hang Seng and Korea's Kospi both gained 0.2%, Japan's Nikkei edged up 0.1% and China's Shanghai Stock Exchange dropped 0.5%.

The minutes from the Fed's April 30-May 1 meeting should give additional color on how its members assessed an unexpected downtick in inflation during the first quarter and could provide hints on future policy.

Recent low inflation has raised expectations that the Fed might cut rates this year, but CMC markets chief market analyst Michael Hewson said this is unlikely, given solid wage growth and low unemployment.

U.S. indexes closed higher Tuesday, lifted by technology stocks after the White House granted temporary exemptions to an export blacklist against Huawei Technologies Co. But investors in Chinese technology companies still face the fallout from the recent resurgence in trade tensions.

Shares in video-surveillance company Hangzhou Hikvision Digital Technology fell 5.5% Wednesday on reports that it could be the latest company to be included on the blacklist.

Elsewhere, a U.S. federal judge ruled that chip maker Qualcomm illegally suppressed competition for cellphone chips, in a decision that could shake up the broader smartphone industry. Qualcomm shares were down 12% in premarket trade.

Meanwhile, the British pound dropped after data showed U.K. core inflation accelerated to a 2.1% annual rate in April, moving ahead of the Bank of England's 2% target and putting pressure on the central bank to nudge up interest rates.

Analysts at ING said the bank is likely to keep rates on hold for now, as the overall economic picture still looks fairly benign and the continuing uncertainty over Brexit will restrict growth in the near term. Still, they didn't rule out the possibility of some tightening in November in the unlikely event that a Brexit deal goes through.

Early optimism at U.K. Prime Minister Theresa May's latest push to gain parliamentary support for her Brexit deal evaporated as it became apparent that she still faces an uphill battle passing the bill.

Joshua Mahony, senior market analyst at IG, said Mrs. May's latest plan is likely to prove as abortive as her last three attempts, as it alienates lawmakers who had previously supported her. Another failure to break the Brexit deadlock raises the prospect of a vote of no confidence, and heightens chances of the U.K. leaving the European Union without a deal, he said.

The British pound rallied immediately after her comments but quickly returned to lower levels. Before her address, the currency had hit a four-month low against the dollar.

U.K. banking and insurance stocks were dragged down by the downbeat Brexit news, with Barclays PLC 1.9% lower and Lloyds Banking Group PLC down 1.4%.

London-listed retailer Marks & Spencer Group was the biggest loser on the FTSE 100, falling 5% after posting a sharp drop in annual pretax profit and launching a heavily discounted rights issue to finance its joint venture with Ocado Group. It was the latest disappointment from the retail sector, after U.S. retailers reported slower sales during the most recent quarter as they brace for higher tariffs on Chinese imports.

Traders have been struggling to gauge the underlying direction of markets, which have become increasingly volatile as tensions between the U.S. and China have flared up in recent weeks.

"The longer the paralysis lasts the more extreme the swings are going to be," Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, said.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was flat.

The yield on 10-year U.S. Treasurys edged down to 2.420% from 2.428% Tuesday. Yields move inversely to prices. German 10-year government bonds were in negative territory at -0.073%.

In commodities, global benchmark Brent crude oil was down 0.2% at $72.01 a barrel.

Stocks mentioned in the article
ChangeLast1st jan.
DAX -0.11% 12263.93 Delayed Quote.16.25%
DJ INDUSTRIAL 0.03% 26727.54 Delayed Quote.14.58%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
HANG SENG -1.19% 28147.46 Real-time Quote.10.21%
KOSPI COMPOSITE INDEX -0.26% 2120.99 Real-time Quote.4.16%
NASDAQ 100 -0.07% 7723.021462 Delayed Quote.22.10%
NASDAQ COMP. -0.32% 8005.696298 Delayed Quote.21.05%
NIKKEI 225 -0.52% 21176.13 Real-time Quote.6.21%
S&P 500 -0.17% 2945.35 Delayed Quote.17.70%
US DOLLAR INDEX -0.42% 96.22 End-of-day quote.-0.48%
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