European stocks are poised for a mixed opening on Wednesday, following significant losses in the previous trading session. The volatility in the market has been largely driven by uncertainties surrounding U.S. President-elect Trump's proposed tariff policies and the Federal Reserve's tightening monetary strategy.
On Tuesday, Neel Kashkari, President of the Minneapolis Federal Reserve, emphasized the importance of monitoring inflation data closely to determine the extent of adjustments needed in the Fed's benchmark for short-term interest rates. Furthermore, Richmond Fed President Thomas Barkin noted that current interest rates are "somewhat less restrictive" than before, suggesting the Fed is well-positioned to adapt its policies in response to evolving economic conditions.
The market's attention is now focused on the imminent release of the U.S. Labour Department's consumer price inflation report for October. Bond trading activity suggests an expectation of stronger CPI figures, potentially diminishing the likelihood of another interest rate cut by the Federal Reserve at its December meeting.
In addition to the CPI report, upcoming data on U.S. producer price inflation, retail sales, and industrial production could offer additional insights into the economy's health and the possibility of future interest rate reductions.
Across global markets, Asian equities mirrored the declines seen on Wall Street, while the dollar remained steady. Gold prices rose above $2,600 per ounce, and oil prices stabilized near their lowest point this month after OPEC revised its forecast for global oil demand growth in 2024.
In the U.S., stock markets exhibited fluctuation before ending slightly lower as investors capitalized on recent gains from a post-election surge, ahead of key economic data to be released later in the week. The S&P 500 declined by 0.3 percent, halting a five-session winning streak, as Treasury yields climbed amid concerns that Trump's tariff plans could stoke inflation and maintain elevated U.S. interest rates. Meanwhile, the Dow dropped 0.9 percent, and the Nasdaq Composite, which is focused on technology stocks, slipped 0.1 percent.
In Europe, stock markets experienced a steep decline on Tuesday as European Central Bank policymakers cautioned that Trump's protectionist measures could heighten inflationary pressures and impede global economic growth. The pan-European STOXX 600 index plunged 2 percent, with Germany's DAX falling 2.1 percent, France's CAC 40 decreasing by 2.7 percent, and the U.K.'s FTSE 100 retreating by 1.2 percent.