European stocks close slightly higher after UK inflation beats expectations; Fed rate decision due
This is CNBC's live blog covering European markets.
European stock markets closed slightly higher on Wednesday after U.K. inflation unexpectedly accelerated and investors around the world awaited the U.S. Federal Reserve's latest decision on interest rates.
After a choppy morning, the pan-European Stoxx 600 index closed 0.2% higher, having pared earlier gains. Food and beverage stocks ticked 1.3% higher while the financial services sector was down 1.1%.
Banks fluctuated between gains and losses before closing down 0.2% after Tuesday's rally.
U.K. inflation data published Wednesday morning showed consumer price inflation rose from 10.1% in January to 10.4% in February. Economists polled by Refinitiv had expected a fall to 9.9%.
Core CPI, excluding food and energy, rose from 5.8% to 6.2%, also surpassing expectations.
The Bank of England will have its monetary policy meeting on Thursday, where the latest figures, as well as recent market volatility, will be front of mind.
Money market bets on a 25 basis point hike were above 95% following the inflation print, according to Eikon data.
Meanwhile, the U.S. central bank is attempting to strike a balance between fighting inflation and stemming a banking crisis. Most investors expect the central bank to stay committed to tightening and to raise rates by 25 basis points.
Asia-Pacific markets rose on Wednesday, while U.S. stock futures inched higher Wednesday as investors braced themselves for the Fed's next move.
Digital asset platforms have become much more efficient, Goldman Sachs CIO says
Goldman Sachs' Chief Investment Officer Marco Argenti discusses the company's new digital assets platform.
UBS buys back bonds to boost investor confidence
UBS said it would buy back 2.75 billion euros worth ($2.96 billion) of debt it sold on March 9 as it attempts to buoy bondholder confidence.
The bank will buy the bonds back at the price at which they were sold rather than at market prices.
Shares of UBS were down 2.1% around 2.50 p.m. London time.
— Hannah Ward-Glenton
What to watch for from the Fed
The Federal Reserve's closely-watched monetary policy announcement and accompanying statements are not expected until 6 p.m. London time, after European markets close.
Investors are braced for a rate hike of 25 basis points.
They will then pore over Fed Chair Jerome Powell's comments, and whether the official statement varies from the body's refrain that "ongoing increases in the target range" are needed to achieve sufficient tightening and get inflation to 2%.
Investors will further look at the individual projections of FOMC members for rates on their "dot plot." Before recent banking turmoil, expectations were for the Fed to raise its estimate for the peak — or terminal — rate beyond the 5.1% projection in December.
This has changed, and markets could get a jolt if Fed officials appear committed to keep fighting inflation despite banking concerns.
— Jeff Cox and Jenni Reid
U.S stocks are little changed Wednesday
U.S. stocks were flat at the open on Wednesday as Wall Street braced for a the Federal Reserve's first potential rate hike since the recent fallout in the banking sector.
The Dow Jones Industrial Average gained 40 points or 0.12%. The S&P 500 fell 0.09%, while the Nasdaq Composite dipped 0.08%.
— Hakyung Kim
Markets in an ‘uneasy calm’ after recent banking sector turmoil, analyst says
Chris Wilgoss, head of global markets treasury at Crown Agents Bank, discusses recent market turmoil ahead of the U.S. Federal Reserve's interest rate decision.
Losses in banking sector can be attributed to Fed policies, says strategist
Marvin Barth, founder of Thematic Markets, says "the systemic losses we're seeing are exactly related to [quantitative easing] and forward guidance."
Recent banking volatility has not been a ‘crisis,’ strategist says
Des Lawrence, senior investment strategist at State Street Global Advisors Ireland, says that while there are fragilities in the banking system, it is "better regulated, better capitalized and a lot more prudent" than it was in 2008 or during the euro zone debt crisis.
Euro climbs against dollar on Lagarde's inflation comments
The euro traded higher against the U.S. dollar after European Central Bank president Christine Lagarde said in a speech that inflation is "still high" and "uncertainty around its path ahead has increased."
The euro was up 0.22% to $1.0791 at 10:27 a.m. CET.
"But the public can be certain about one thing: we will deliver price stability, and bringing inflation back to 2% over the medium term is non-negotiable," Lagarde added.
The ECB last week hiked rates by 50 basis points.
— Jenni Reid
Stocks on the move: Marks & Spencer up 3.8%, British Land down 4.2%
British retailer Marks and Spencer Group topped the Stoxx 600 index on Wednesday morning. Goldman Sachs upgraded the stock from a "sell" to a "neutral" rating on Tuesday, according to MarketBeat.
British Land, a property company sensitive to interest rate rises, posted a 4.2% decline after U.K. inflation unexpectedly accelerated, boosting rate hike expectations.
— Jenni Reid
Sterling extends gains after UK inflation rises unexpectedly
The British pound was up 0.5% against the U.S. dollar to $1.2278 at 8:30 a.m. London time, extending early morning gains after a hotter-than-expected U.K. inflation print.
Sterling has held up relatively well during the recent banking sector turbulence.
Jane Foley, head of FX strategy at Rabobank, said the consumer price inflation number had lifted GBP further as markets reconsidered their rate hike expectations.
"It is not what the BoE will have wanted to see ahead of its policy meeting today and does complicate its forecast for a sharp move lower in UK price pressures this year," Foley told CNBC by email.
"The market has been thinking that the Bank's interest rate policy could be 'one and done'. This view is now being questioned."
Money market bets, after the inflation print, stand at a 25 basis point hike, according to Eikon data.
The euro was down 0.4% against sterling, at £0.8777.
Meanwhile U.K. government bond yields moved higher, with the 2-year yield up 18 basis points to 3.468% and the 10-year yield up 11 basis points to 3.479%.
— Jenni Reid
Europe stocks post slight gains at the open
The European Stoxx 600 index opened flat on Wednesday before nudging 0.15% higher.
Banks also moved from flat to slight gains after Tuesday's rally, which boosted bank share prices across the region as fears of a prolonged crisis subsided.
The financial services sector was up 0.5% in early trade while retail stocks led gains, up 1.1%. Telecom stocks had the biggest fall, down 0.64%.
However the U.K.'s FTSE 100, Germany's DAX and France's CAC 40 were all in the red at 8:15 a.m. in London.
— Jenni Reid
UK inflation comes in hotter than forecast
U.K. annual inflation increased from 10.1% in January to 10.4% in February, official figures showed. Economists in a Refinitiv poll expected a 9.9% increase.
Core inflation, which excludes energy, food, alcohol and tobacco, rose from 5.8% to 6.6%; while monthly inflation was up from 0.7% to 1%.
The primary driver of year-on-year inflation was housing and household services, chiefly electricity and gas bills, the Office for National Statistics said.
The monthly change was fueled by restaurants and cafes, food, and clothing, though partly offset by declines in recreational and cultural goods and services, as well as motor fuels, the ONS added.
The details in the inflation print will be closely-watched by the Bank of England's Monetary Policy Committee, which meets Thursday for its latest interest rate decision after its 50 basis point hike in February.
Markets are now pricing in a 61.6% chance of a 25 basis point hike, up from around 57% on Tuesday, Reuters reported.
— Jenni Reid
CNBC Pro: Exxon vs. Chevron? Goldman Sachs reveals its favorite — and other energy picks
Energy stocks dropped last week as oil prices fell to a 15-year low, with the banking crisis roiling markets.
Following the pullback, Goldman Sachs names its favorite stocks in energy — and reveals whether it prefers Exxon or Chevron.
CNBC Pro subscribers can read more here.
— Weizhen Tan
Government could backstop more deposits if necessary, says Treasury Secretary Yellen
Treasury Secretary Janet Yellen said Tuesday that while authorities believe they've taken sufficient action to stem liquidity problems in the banking sector, the government is prepared to guarantee even more deposits if the banking crisis gets worse.
"The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system," she said in remarks prepared for a speech to the American Bankers Association. "And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion."
— Tanaya Macheel, Jeff Cox
China will leverage position to gain from a vulnerable Russia, analysts say
China's president, Xi Jinping, will wrap up his visit to Russia soon, and analysts argue Beijing will leverage its strong position to make gains from President Vladimir Putin.
"Putin is weak, coming into these negotiations from real vulnerability," said Timothy Ash, emerging markets strategist at BlueBay Asset Management, adding, he wondered "what price Xi will extract for saving Putin ... he has to get something out of it."
Overall, China has an upper hand economically over Russia, said Alicja Bachulska, policy fellow at the European Council on Foreign Relations. "If China supports Russia in a more substantial way this will continue even more," she added.
Read the full story here.
— Yeo Boon Ping, Holly Ellyatt
CNBC Pro: A longtime bear is ‘creeping back’ into tech — and has some picks to play it
Tech investor Paul Meeks has been bearish on tech for some time, but is finally beginning to warm up to the sector.
"I'm creeping back into the sector after long advocating an underweight position in it," he told CNBC on Friday. He joins a chorus of investors who have turned more bullish on the sector in recent weeks.
Pro subscribers can read more about Meeks' top stock picks here.
— Zavier Ong
CNBC Pro: Morgan Stanley is 'outright bullish' on Asia, emerging markets stocks
Morgan Stanley says it's "time to turn bullish" on Asia and emerging markets' growth stocks.
While markets may be pricing in a rate hike at the Federal Reserve's March meeting, many also expect rate cuts later this year. Easing financial conditions should benefit growth stocks, the strategists said.
CNBC Pro subscribers can read more here.
— Jihye Lee, Christine Wang
Fed's 2% inflation target 'unlikely' to happen in 2023, according to Insight Investment
As the Federal Reserve is looking to announce its latest monetary policy decision on Wednesday, Insight Investment believes that inflation will continue to remain high in 2023.
"The 2% inflation objective is unlikely to be realized in 2023 but there is some hope that we may see a more normal inflation environment by 2024," Brendan Murphy, Head of Core Fixed Income, North America wrote in a Tuesday note.
"As the lagged effect of the Fed's policy rate increases along with the more recent tightening of financial conditions associated with the banking sector concerns works their way through the economy, the effects are likely to be disinflationary. Those same conditions present many risks to the growth picture," Murphy added.
Insight Investment expects the central bank will raise interest rates by 25 basis points on Wednesday, but added that "the recent market volatility could be an opportunity for them to pause at this meeting."
"The argument for a pause is strong as another 25bp increase could be seen as contributing to market volatility and financial instability," said Murphy.
"However, not delivering on 25bps might cause some to question the Fed's resolve in bringing inflation lower which could create a whole new set of problems. Pausing may lead to an easing of financial conditions that work against their inflation goals."
— Hakyung Kim
European markets: Here are the opening calls
European markets are expected to open higher Thursday.
The U.K.'s FTSE 100 index is expected to open 14 points higher at 7,626, Germany's DAX 13 points higher at 15,837, France's CAC up 4 points at 7,253 and Italy's FTSE MIB 17 points higher at 26,579, according to data from IG.
Earnings come from Tate & Lyle, Manchester Utd, Johnson Matthey, United Utilities and Pets at Home. Data releases include a detailed breakdown of Germany's first-quarter gross domestic product.
— Holly Ellyatt