European markets cautious as focus turns to Fed

LONDON — European markets were muted on Wednesday as global investors await a crucial monetary policy decision from the U.S. Federal Reserve.

The pan-European Stoxx 600 slid 0.2% in early trade. Basic resources dropped 1.6% to lead losses while travel and leisure stocks gained 0.8%.

The Fed will announce its big interest rate decision on Wednesday afternoon, with markets largely expecting the central bank to hike rates by half a percentage point as it looks to rein in inflation, along with announcing a plan to cut its balance sheet from June.

Corporate earnings remain a key driver of individual share price movement in Europe. Volkswagen, UniCredit, Enel, Siemens Healthineers, Fresenius and TeamViewer were among those reporting before the bell on Wednesday.

Kindred Group shares climbed more than 5% in early trade after U.S. hedge fund Corvex Management disclosed a 10% stake in the online gambling company. Belgian chemicals company Solvay also added more than 5% after raising its guidance.

At the bottom of the European blue chip index, Swedish construction company Skanska slid more than 7% after its first-quarter earnings report.

On the data front, final PMI (purchasing managers’ index) readings for April are due from across the euro area on Wednesday morning, along with March’s retail sales figures for the bloc.

Investors are also keeping on eye on the war in Ukraine, with the EU lining proposing additional oil sanctions on Russia as Russian forces continue to bombard targets in eastern Ukraine.

The European Commission on Wednesday put forward new sanctions against the Kremlin which will include a six-month phase out of Russian crude imports.

U.S. stock futures were fractionally higher in early premarket trading as investors braced themselves for the upcoming Fed decision. Shares in Asia-Pacific retreated during Wednesday trade, with Hong Kong’s Hang Seng index shedding more than 1% as shares of tech giants Tencent and Alibaba both declined.

Bond yields in Europe remain elevated, with Germany’s benchmark 10-year bund yield hovering just above 1%, having crossed that marker on Tuesday for the first time since 2015, just two months after it was below zero. Yields move inversely to prices.

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