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Investors Hold Fire Ahead of Fed Decision

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06/19/2019 | 08:33am EDT

By Nathan Allen and Joanne Chiu -- European stocks and U.S. futures mostly unchanged

-- Yield on 10-year Treasurys rose

-- Asian indexes rallied, led by gains in Hong Kong

European stocks and Wall Street futures were broadly flat Wednesday as investors avoided big bets ahead of the Federal Reserve's highly anticipated interest-rate decision later in the day.

Weakness in utilities and retail companies was offset by gains in the automotive and banking sectors, leaving the Stoxx Europe 600 benchmark largely flat in afternoon trade.

Shares of EasyJet PLC, Air France-KLM and British Airways-owner International Consolidated Airlines Group SA fell sharply after HSBC downgraded the stocks, warning that weakening demand for short-haul flights was likely to weigh on earnings across the sector.

Chinese equities led gains in Asia, where markets welcomed upbeat comments on trade from President Trump and the prospect of fresh central-bank stimulus for the eurozone.

Hong Kong's benchmark Hang Seng Index rose 2.6% to a one-month high, while the Shanghai Composite was up 2.2%. Other major indexes in Japan, Singapore, South Korea and Taiwan gained more than 1%.

Australian stocks reached their highest level in more than 11 years, with the country's ASX 200 benchmark moving within 3% of 2007's best-ever finish.

Major indexes around the world surged Tuesday, while bond yields dropped after European Central Bank President Mario Draghi signaled the ECB could cut rates and expand its bond-buying program to shore up eurozone inflation.

On Tuesday, Mr. Trump and Chinese President Xi Jinping agreed to meet at next week's Group of 20 summit in Japan, sparking hopes for a trade truce and driving up U.S. indexes near their record highs.

"The upcoming meeting in Japan is unlikely to deliver a major breakthrough for the U.S.-China trade relationship, but having the two sides talk is better than no talk," said Steven Leung, executive director of institutional sales at UOB Kay Hian.

Wednesday's focus remained squarely on the Fed, which is set to publish a statement outlining its position on future rate cuts.

ING senior rates strategist Benjamin Schroeder said investors hoping for a July rate cut will likely be disappointed. Fed Chairman Jerome Powell will instead aim to strike a balance between avoiding committing to any near-term loosening, while hinting at the possibility of future cuts, Mr. Schroeder said.

Further complicating the situation, Mr. Trump suggested Tuesday that he would consider demoting Mr. Powell if he isn't satisfied with the meeting's outcome. Mr. Trump has called repeatedly on the Fed to lower interest rates to boost the economy.

Elsewhere, the U.K.'s consumer inflation rate rose 2% on the year in May, in line with expectations. The Bank of England is due to publish its own rate decision Thursday, though analysts don't expect Gov. Mark Carney to echo the ECB's dovish rhetoric.

In commodities, global oil benchmark Brent crude fell 0.6% to $61.70 a barrel, while gold slipped 0.3% to $1,346 a troy ounce.

The WSJ dollar index, which measures the currency against a basket of its peers, was down 0.1%.

Write to Nathan Allen at nathan.allen@dowjones.com and Joanne Chiu at joanne.chiu@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AIR FRANCE-KLM 2.86% 9.07 Real-time Quote.-6.98%
ASX LTD -4.79% 83.17 End-of-day quote.45.73%
CHINA-SHANGHAI COMP 0.79% 2924.2 End-of-day quote.17.07%
CRB COMMODITY INDEX 0.10% 195.01 End-of-day quote.0.00%
EASYJET 1.27% 1112 Delayed Quote.-0.45%
EURO / US DOLLAR (EUR/USD) 0.00% 1.1217 Delayed Quote.-2.14%
HANG SENG -1.52% 28351.04 Real-time Quote.11.38%
HSBC HOLDINGS PLC 0.51% 665.9 Delayed Quote.2.44%
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, SA 1.47% 456.4 Delayed Quote.-27.17%
LONDON BRENT OIL 0.13% 63.28 Delayed Quote.17.43%
S&P/ASX 200 -0.14% 6691.2 Real-time Quote.17.76%
STOXX EUROPE 600 0.30% 388.46 Delayed Quote.14.56%
STOXX EUROPE 600 NR 0.31% 832.29 Delayed Quote.17.09%
US DOLLAR INDEX 0.37% 97.15 End-of-day quote.0.48%
WTI 0.66% 56.48 Delayed Quote.24.56%
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