US stock futures rose modestly on Wednesday ahead of a widely expected interest rate hike by the Federal Reserve as it continues to cool the worst inflation in 40 years.
Dow Jones industrials and S&P 500 futures rose 0.4% each.
It is no longer a question of whether the Fed will raise rates on Wednesday, but how much it will raise at the end of the central bank’s two-day meeting.
Bond yields mostly rose. The 10-year Treasury yield, which influences mortgage rates, rose to 3.56% from 3.52% late Monday and is trading at its highest levels since 2011.
The 2-year Treasury yield, which tends to track expectations for Fed action, held steady at 3.96%, hovering around its highest levels since 2007.
Stocks have tumbled and Treasury yields have taken off as the Fed raises the cost of borrowing money to cool the economy.
Fed Chairman Jerome Powell bluntly warned in a speech last month that rate hikes “would bring some pain.”
In Europe, markets mostly recovered mid-day from earlier losses, with France’s CAC 40 up 0.2%, Germany’s DAX inching into positive territory and Britain’s FTSE 100 up 0. 9%.
Japan’s benchmark Nikkei 225 index fell 1.4% to end at 27,313.13. Australia’s S&P/ASX 200 fell 1.6% to 6,700.20. South Korea’s Kospi lost 0.9% to 2,347.21. Hong Kong’s Hang Seng lost 1.8% to 18,444.62, while the Shanghai Composite fell 0.2% to 3,117.18.
Global tensions add to uncertainties. The Russian-controlled regions of eastern and southern Ukraine have announced plans to start voting this week to become integral parts of Russia.
Kremlin-backed efforts to swallow up four regions could set the stage for Moscow to escalate the war against Ukraine. Russian President Vladimir Putin recently criticized what he described as US efforts to preserve its global dominance and ordered officials to increase weapons production.
The war has killed thousands of people, pushed up food prices around the world and caused energy costs to skyrocket. Natural gas futures rose 5% on Wednesday after Putin’s televised speech and shares of natural gas producers are among the biggest gainers in the S&P.
Later on Wednesday, the Fed is expected to raise its key short-term rate by three-quarters of a point for the third time. That would lift its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level in 14 years, and from zero at the beginning of the year.
The language used by Powell is read as closely as the decision on rate hikes, with markets looking for some clue as to how the Fed views the health of the US economy.
Central banks around the world find themselves in the same dilemma, trying to cool red-hot economies without driving them into recession.
The Bank of Japan began a two-day monetary policy meeting on Wednesday, although analysts expect the central bank to stick to its loose monetary policy. Rate decisions from Norway, Switzerland and the Bank of England are as follows. Sweden surprised economists this week with a total point gain.
In energy trading, benchmark US crude rose $1.57 to $86.02 a barrel in electronic trading on the New York Mercantile Exchange. It fell 1.5% on Tuesday, weighing on energy stocks. Brent crude, the international standard, rose $2.11 to $92.73 a barrel.
The average price of a gallon of gasoline rose for the first time in more than three months, from $3,674 to $3,681, according to Motor Club AAA.
In currency trading, the US dollar rose to 144.04 Japanese yen from 143.74 yen. The euro fell to 99.09 cents from 99.73 cents.
Kageyama reported from Tokyo; Ott reported from Washington