Stocks bide time ahead of the Fed decision; oil slumps. On Wednesday, oil prices dropped to their lowest point in six months, and global stock markets performed poorly in advance of the final policy decision that the Federal Reserve will make this year and any hints on the timing of rate decreases for the following year.

In addition, traders were analyzing the implications of an agreement reached at the COP 28 climate conference to initiate a reduction in the worldwide use of fossil fuels. Additionally, Argentina’s proposal to weaken its currency by more than fifty percent, reduce energy subsidies, and cancel public works bids was also being considered.

Brent reached its lowest point since the end of June, when prices reached $72.51 a barrel. Concerns about a slowdown in global economic development and oversupply led to a drop in the price of crude oil in the United States, which reached $68.71 per barrel. The Energy Information Administration of the United States boosted its prediction for the supply of crude oil in the United States in 2023 by 300,000 barrels per day, and there was an increase in the amount of crude oil delivered from Russia.

The broadest index of equities worldwide that MSCI maintains stayed unchanged throughout the day, remaining close to its best level since the beginning of August. The MIWD00000PUS file

The benchmark has been supported in recent weeks by prospects of a significant interest rate reduction next year while economic growth in the United States remains solid. A surge over July’s peak, less than one percent away, would push the benchmark to a 20-month high.

After its two-day policy meeting, scheduled for Wednesday, the Federal Reserve is expected to reveal its decision about the nation’s interest rate.

Even though Tuesday’s U.S. inflation data, which was substantially in line with consensus, did not change the markets’ expectations, it is almost probable that policymakers will retain interest rates at their current level.

Therefore, the focus will be on Powell’s press conference and the Federal Reserve’s dot plot of future policy trajectory. This aims to determine the extent to which it deviates from the present price of over one hundred basis points of rate reduction in the United States by the end of the following year.

“We need to be focused on what the Federal Reserve and the European Central Bank are going to say, as well as what kind of reaction we will get to the present pricing. According to Samy Chaar, chief economist at Lombard Odier, “the fundamentals justify a recalibration of monetary policy, but not to the extent that is priced in.”

A meeting between the European Central Bank, the Bank of England, the Norges Bank, and the Swiss National Bank is scheduled for Thursday.

European stock markets had a little increase, with the broad STOXX (.STOXX) benchmark gaining 0.2% and trading close to its best level since February 2022. The German and French indices likewise reached record highs during this period. The (.GDAXI) and (.FCHI)

Following the closing of U.S. equities on Tuesday at new highs for the year and the Cboe Volatility Index (.VIX) falling to a level nearly four years below its previous low, U.S. share futures moved up by a single tick.

Attention was also focused on Argentina, where the Minister of Economy, Luis Caputo, initiated economic shock treatment to resolve the most severe crisis the country had experienced in decades.

On Wednesday, sharp movements in “non-deliverable” futures for the Argentine peso revealed that traders were wagering that the value of the peso would continue to fall after the new administration of the nation announced that it would weaken the currency by more than fifty percent, bringing it down to eight hundred dollars per peso.

We have formed a favorable initial impression of the news. According to experts at Goldman Sachs, Argentina’s macroeconomic issues stem from the country’s fiscal profligacy, and it is of the utmost importance to begin the fiscal adjustment process as quickly as possible.

Data revealed that the economy declined in October in the United Kingdom, which increased the likelihood of a recession and put the Bank of England’s determination to maintain its strict anti-inflation stance to the test. This was in contrast to the Bank of England’s decision to reduce interest rates from their 15-year high.

Two-year gilt yields sensitive to interest rates fell by over five basis points, reaching 4.45%, their lowest level in approximately a month. Additionally, the pound fell by 0.2% versus the dollar, reaching $1.2562, and it also weakened against the euro.

On the day, the yield on Germany’s two-year bond remained unchanged at 2.71%, while the yield on the two-year Treasury note remained unchanged at 4.722%. Early in December, the yield on the two-year Treasury note reached a nearly six-month low of 4.540%.

Not far from its lowest level in three months, the 10-year U.S. Treasury note yield remained stable at 4.2063%.

On Wednesday, Chinese markets had the opportunity to respond to a meeting of China’s top leaders tasked with defining the agenda for the conference. Following the conclusion of the meeting, the official media reported that Beijing would increase the number of policy modifications it would make to assist economic recovery in 2024.

On Wednesday, the Hang Seng Index (HSI) in Hong Kong fell by 0.9%, while the Chinese blue-chip stocks (CSI300) plummeted by 1.7%. This was because the Economic Work Conference did not take any significant steps to stimulate the economy, which left many dissatisfied.

A price of $1,973.35 per ounce of gold reached a new low in the commodities markets, marking a decline of more than three weeks.