Overnight, US stock markets halted the weeks-long rally that brought Nasdaq to a record high. Equities dropped as investors started to express worries about the unreasonable optimism about the economic recovery while the coronavirus pandemic is still far from over. The index fell 0.8%, its largest loss in almost three weeks, as investors proceeded to profit-taking after strong gains. The S&P 500 lost 25.21 points while the Dow Jones Industrial Average dropped 1.1%.
In Asia, stocks were mixed on Wednesday after China announced inflation data that fell below expectations. May’s consumer price index fell 2.4% year-on-year, while falling 0.8% month-on-month while producer price index fell 3.7% year-on-year versus -3.1% in the previous month. By the end of the session, China’s Shanghai Composite fell 0.42%.
Following two straight sessions of losses, European stock markets opened in the positive territory on Wednesday. The Stoxx Europe 600 index rose 0.6% after a decline by over 1% yesterday. U.S. stock index futures also signal a bounce for Wall Street. Now, investors shift focus to the U.S. Federal Reserve policy meeting. The outcome of the meeting will be announced later in the day.
Meanwhile, the dollar is losing ground nearly across the board as traders prepare for the remarks from the Fed. It is widely expected that the central bank will refrain from additional stimulus measures this time but the meeting still could bring some surprises. Investors will be closely monitoring Powell’s tone on the economic outlook and the potential speed of a recovery from the coronavirus crisis. Less dovish comments could push the greenback higher and put risky assets under pressure.
Elsewhere, gold prices have been climbing for the third day in a row on Wednesday as traders prefer to cut their risk exposure ahead of the key event of the week. The retreat in oil prices adds to nervousness these days. As such, the precious metal climbed above $1,700 and is challenging the $1,720 region at the time of writing. If the selling pressure surrounding the US dollar persists in the near term, the bullion will stay on the offensive.