European stocks rise, dollar lower before Fed rate…

European stocks rise, dollar lower before Fed rate decision

The US benchmark oil contract WTI traded under $70 per barrel Wednesday for the first time since OPEC+ cut output a month ago in a bid to bolster prices. ©AFP

London (AFP) - European stock markets advanced and the dollar dropped Wednesday with all eyes on the Federal Reserve's latest decision on US interest rates.

Recession fears linger as central banks worldwide have hiked borrowing costs to fight soaring inflation.

Against this background, triggering concerns of slowing demand for energy, the US benchmark oil contract WTI traded under $70 per barrel Wednesday for the first time since OPEC+ cut output a month ago in a bid to bolster prices.

"Caution is set to take centre stage ahead of the Fed's interest rate decision later (Wednesday), as investors mull what's ahead for the mighty US economy," said Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown.

The European Central Bank announces its rate decision Thursday.

Ahead of the announcements, data Wednesday showed unemployment in the eurozone hit a record low of 6.5 percent in March.

Interest rate worries had the opposite effect Tuesday on Wall Street, conspiring with falling confidence in regional banks to fuel losses that bled over into Asia on Wednesday.

Also weighing on investor sentiment were fears that Democrats and Republicans could fail to reach a deal on raising the US debt ceiling, triggering a default by the world's largest economy as early as June 1.

"It is a key event risk in the next few weeks and possibly a month or two," BNY Mellon Investment Management's Aninda Mitra told Bloomberg Television, adding that the impasse "feeds into our overall defensiveness".

Stephen Innes of SPI Asset Management said that even if a crisis were averted, it may create a drag on markets.

"As we have seen in the past, a resolution to the debt limit is likely to occur," he noted.

"The problem for risk markets is a negotiated deal may include a pullback in government spending that could negatively impact US growth."

Innes added that "downward price pressure could persist in oil markets until it becomes clear that a significant recession will be avoided and growth in global oil demand won't be stunted".