After warmer-than-expected consumer price data last week, investors dramatically increased their bets on a rate hike of 75 basis points (bps) instead of 50 bps, triggering a sell-off in global markets.
The European Central Bank earlier said its rate-setting board of governors would hold a rare unscheduled meeting to discuss recent gains in government bond markets, sending European stocks up 1%. [.EU]
Traders are currently pricing in a 94% chance of a 75 basis point hike, up from 8.2% a week ago, according to CME’s FedWatch tool. Such a large increase would bring the Fed’s short-term key rate to between 1.5% and 1.75%.
The central bank will issue its statement at 2pm ET (1800 GMT), with a press briefing from Fed Chairman Jerome Powell expected at 2:30pm ET.
“75 basis points have already been priced in, and if the direction is more modest in the range, buyers will be out in force for the rest of the week,” said Jeffrey Haley, senior market analyst at OANDA.
Rising inflation concerns, aggressive central bank tightening, the war in Ukraine and China’s COVID-19 restrictions have dragged global equities this year.
The benchmark S&P 500 index fell more than 20% from its last record on Monday, confirming a bear market that began on Jan. 3, according to a commonly used definition.
As of 06:50 ET (1050 GMT), Dow e-minis were up 108 points, or 0.36%, S&P 500 e-minis were up 20 points, or 0.54%, and Nasdaq 100 minis were up 75.25 points, or 0.67%.
Among stocks, US shares of Baidu Inc rose 3.6% in premarket trading after Reuters reported that the Chinese Internet search engine giant is in talks to sell its controlling stake in iQIYI Inc in a deal. Which could be worth about $7 billion iQIYI
Qualcomm rose 0.6% after winning a fight against a 997 million euro ($1.05 billion) fine imposed by EU antitrust regulators four years ago.
Cryptocurrency stocks including Hut 8 Mining, Coinbase Global and Riot Blockchain fell as Bitcoin extended its slide, losing 6.9% to its December 2020 low.
