US stocks fell on Wednesday as markets struggled to find direction as investors waited for the Federal Reserve to set interest rates for the world’s largest economy next week.
The Wall Street benchmark S&P 500 lost 0.3 percent, giving up early gains. The tech-heavy Nasdaq Composite fell 1 percent.
European indices trailed Wall Street lower. The regional Stoxx 600 ended the day down 0.2 percent, while the French Cac 40 fell 0.1 percent. London’s FTSE 100 traded unchanged.
The moves came as investors braced for the Fed’s two-day meeting next week, with the market pricing in no change to the Fed’s 5.25-5.5 percent target range.
Many expect the tightening campaign to resume in July after strong economic data pressured the Fed to dampen demand enough to bring inflation under control.
Until then, markets have adopted a “wait and see attitude, hoping the disinflationary narrative will hold,” said Samy Chaar, chief economist at Banque Lombard Odier and Cie SA.
Meanwhile, the Russell 2000 index of small-cap companies rose 1.7 percent, taking the benchmark to its highest level since the US regional banking crisis in March.
The index is up nearly 8 percent since late May, outperforming the S&P 500 and Nasdaq Composite, both up 2 percent, over the same period.
“Small-cap stocks are rising, largely on the back of a rebound in US regional bank stocks, which this week re-entered the investment-grade bond market for the first time since the banking crisis began,” said Francesco Pesole. FX strategist at ING.
The KBW regional bank index rose 2.8 percent on Wednesday, continuing its rally from the previous session.
Germany’s Dax ended 0.2 percent lower after data showed that industrial production in the euro zone’s largest economy rose 0.3 percent in April, recovering from the previous month’s decline but below economists’ expectations for an increase of 0.6 percent lagged behind.
The moves come a day after a European Central Bank survey showed consumers were steadily lowering their expectations for euro-zone inflation.
The data is being closely watched by traders ahead of an ECB meeting next week, which is expected to raise its deposit rate from the current 3.25 percent to stave off persistent inflation.
Annual consumer prices in the 20-country single currency bloc rose 6.1 percent for the year to May, down from 7 percent in April, but investors expect they will remain too high to convince policymakers to stop raising interest rates.
“While the ECB would welcome the drop in inflation expectations, its job is far from over,” said Mohit Kumar, chief financial economist for Europe at Jefferies.
Asian equities presented a mixed picture, with Hong Kong’s Hang Seng index up 0.8 percent but Japan’s Topix slipping 1.3 percent.
China’s CSI 300 slipped 0.5 percent after data showed Chinese exports fell more-than-expected in May, further dampening the country’s hopes of a strong economic recovery from the Covid-19 pandemic.
Exports shrank 7.5 percent from the same period last year, falling well short of forecasts by analysts polled by Portal, who had expected a 0.4 percent contraction.
The Turkish lira fell as much as 7.6 percent to a new record low of 23.2 against the dollar as Turkey eased its long-standing struggle to defend the currency.