Global markets recovered some of their recent losses on Wednesday, with Wall Street futures pointing to a gain in early trading as investors looked ahead to pivotal meetings of economic policymakers seeking to curb inflation without denting economic growth. or destabilize the markets.
The main event of the day is the meeting of the Federal Reserve, which is expected to discuss raising benchmark interest rates by three-quarters of a point, which would be the largest increase since 1994.
But the European Central Bank took unexpected action, calling an unscheduled meeting on Wednesday to discuss market conditions. The borrowing costs of euro-zone countries have diverged widely in recent weeks, leading to the so-called fragmentation that Christine Lagarde, the president of the ECB, said last week the bank “would not tolerate”. At the time, the bank said it might consider reinvesting the proceeds from maturing bonds in its pandemic-era bond-buying program to avoid this fragmentation.
Wednesday’s meeting may be an opportunity for the bank to clearly state how it plans to avoid excessive borrowing costs as financial conditions tighten in the eurozone, said Holger Schmieding, chief economist at Berenberg Bank.
“Developing a soft landing for economies hit by external shocks and facing the highest inflation in decades will be as difficult as it sounds for all major central banks,” he said in a note. “The additional challenge for the ECB is that its policies affect borrowing costs in 19 economies with different fundamentals.”
Many European stock and bond markets recovered after news of the ECB meeting. The Stoxx 600 index rose 1 percent in early trading and Italian bond prices rocketed, pushing yields down that had recently risen. The euro gained 0.8 percent against the dollar.
Earlier in the day, most Asian markets gained with Hong Kong’s Hang Seng gaining 1.1 percent and China’s Shanghai Composite 0.5 percent, while Japan’s Nikkei closed 1.1 percent lower.
Shares on Wall Street plunged into bear market territory Monday, a relatively rare event that marked a drop of at least 20 percent from their most recent peak. But trading was relatively calm on Tuesday, with the S&P 500 closing 0.4 percent lower and Wednesday futures pointing to a rebound at the opening bell.
