By Elizabeth Howcroft
PARIS (Reuters) -European stocks hovered near recent highs on Wednesday, with sentiment helped by new AI deals and the prospect of improving U.S.-China trade relations, while traders waited for a U.S. Federal Reserve meeting, expecting a 25-basis-point rate cut.
Wall Street closed at a record high on Tuesday, after Nvidia announced that it would build seven supercomputers for the U.S. Department of Energy, and Microsoft reached a deal allowing OpenAI to restructure.
Japanese and South Korean stocks also hit new records during Asian trading.
At 0946 GMT, the MSCI World Equity Index was up by less than 0.1% on the day
Europe’s STOXX 600 was up 0.1%, Germany’s DAX was down 0.1%, France’s CAC 40 was unchanged and London’s FTSE 100 was up 0.5% having hit a new record high.
American technology companies Microsoft, Alphabet and Meta are due to report earnings later on Wednesday.
“Investors want to see not just solid numbers but evidence of sustained AI monetisation and broadening demand beyond the initial boom,” said Charu Chanana, chief investment strategist at Saxo.
TRUMP EXPECTED TO REDUCE U.S. TARIFFS ON CHINA
U.S. President Donald Trump was on the final leg of his Asia trip, in South Korea, optimistic about advancing an unresolved tariff deal with South Korea’s Lee Jae Myung. Trump is then due to have talks with Chinese President Xi Jinping in the port city of Busan on Thursday.
Trump said he expects to reduce U.S. tariffs on Chinese goods in exchange for Beijing’s commitment to curb exports of fentanyl precursor chemicals.
While the talks could ease market worries about an escalating trade war, analysts warned that the bar for a market reaction was high.
“With Wall Street futures at record highs and bullish momentum already waning, its difficult to see how much of the excitement isn’t already priced in,” said Matt Simpson, a senior market analyst at City Index in Brisbane.
“So unless Trump and Xi deliver a joint statement with actual details, appetite for risk may need another source to extend the current moves.”
MARKETS WAIT FOR FED MEETING
Market-watchers were waiting for the Fed meeting later in the session, at which a 25-basis-point cut is almost fully priced in.
With the ongoing U.S. government shutdown having led to a shortage of economic data, traders will be looking for any comments hinting that the Fed will continue to cut rates in December.
The Fed could also announce that it is stopping its so-called quantitative tightening (QT) programme.
The prospect of lower U.S. rates kept U.S. Treasuries supported, with the 10-year yield at 3.9909%.
European government bond yields were steady, with the benchmark German 10-year yield at 2.6275%.
In currencies, the Japanese yen was at 152.25 dollars per yen. The yen had strengthened earlier in the session after U.S. Treasury Secretary Scott Bessent stepped up his criticism of Tokyo’s prolonged low rates.
The Australian dollar rose after inflation data showed prices rising faster than expected, reducing hopes for a rate cut.
The euro was steady at $1.1643 and the dollar index was up 0.2% on the day at 98.833.
“For short-term rates and FX post-decision reaction will likely come down to Powell’s interpretation of the inflation risks,” MUFG’s head of research for global markets, David Halpenny, wrote in a research note.
Oil prices rose as traders were optimistic about the U.S.-China meeting. Brent crude futures were up 0.2% at $64.55 a barrel, while U.S. crude was up 0.2% at $60.26 a barrel. [O/R]
Safe-haven gold traded at $4,024.29 an ounce. [GOL/]
(Reporting by Elizabeth Howcroft in Paris and Ankur Banerjee in Singapore, Additional reporting by Rae Wee in Singapor; Editing by Sharon Singleton)
