European Stocks Steady Ahead Of Fed Rates Decision; Orsted Falls

Visitors in the lobby of the Euronext NV stock exchange in Paris, France, on Tuesday, Aug. 1, 2023. France's finance minister Bruno Le Maire said talks with officials in China this weekend were positive and called for Chinese companies to invest more into Europe, especially in electric vehicles and other sectors to combat climate change.

(Bloomberg) -- European equities were steady as investors awaited a Federal Reserve interest rate decision due later on Wednesday and assessed a slew of company earnings. Orsted A/S slumped after a $4 billion writedown.

The Stoxx Europe 600 erased earlier gains, trading steady by 10:18 a.m. in London. Retailers and health care stocks led gains, while media and chemicals lagged. Among individual movers, Orsted plunged after saying it dropped the development of two US wind projects, recording impairment charges significantly above its previous predictions. Meanwhile, British clothing retailer Next Plc gained after raising profit guidance.

The Fed is poised to hold interest rates steady at a 22-year high for a second meeting, while leaving open the possibility of another hike as soon as December with US economic growth staying resilient.

The European benchmark is close to wiping out all gains made this year and entering a correction, though it did regain some ground over the past two days. Other than the Fed decision, investors are parsing earnings statements to assess the health of profits even as European economies slow. Traders are also monitoring developments in the Israel-Hamas war and their impact on oil prices.

“Our short-term outlook is that the likelihood of a year-end rally has increased now, given oversold conditions, an elevated put skew and some shorting. On top, you get more share buybacks in November and December,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “So, for ‘technical' reasons the likelihood for a bounce seem to be bigger now, given also that we see often a volatility reset after the Fed meeting which will squeeze more participants into equities again.”

SECTORS IN FOCUS

UK homebuilder after data showed house prices rose unexpectedly in October, adding to signs that the property market is stabilizing as the Bank of England nears the end of its rate-hiking cycle
European mining stocks after iron ore rallied to its highest since April, as signs increase that short-term supply disruptions are on the horizon

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--With assistance from Michael Msika.

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