Futures gain before Fed; Stocks, euro rise on ECB

U.S. index futures gained along with stocks in Europe as policy makers on both sides of the Atlantic grapple with soaring inflation, slowing economic growth and volatile markets.

Contracts on the S&P 500 and Nasdaq 100 posted modest gains before a crucial Federal Reserve policy decision later Wednesday, with markets pricing in the biggest rate hike since 1994 amid worries about the outlook for the economy. Treasury yields dipped and the dollar retreated from a two-year high.

The Stoxx Europe 600 index jumped more than 1 per cent, snapping a six-day losing streak, while the euro strengthened and the region’s bonds advanced as the European Central Bank’s Governing Council started an emergency meeting. While new stimulus may not be on the agenda, officials will discuss a crisis strategy and the reinvestment of bond purchases conducted under the now-halted pandemic emergency program, Bloomberg reported. 

Fears of stagflation have driven stocks into a bear market and triggered a stunning selloff in bonds in recent days. Uncertainty is elevated heading into the Fed decision: increments of 50 basis points, 75 basis points and even 100 basis points have all been chewed over by commentators. Parts of the US yield curve remain inverted, signaling concerns that restrictive monetary policy will lead to an economic downturn.