European stocks have three reasons to fall out of the Federal Reserve meeting on Wednesday evening. The latest inflation data out of the US showed a large beat and put pressure on the Fed to hike rates aggressively. STIR markets now price in a 100% chance of a 75bps hike and an 80% chance of a 100bps hike. Inflation pressure is likely to keep the Fed hiking and global stocks pressured. More and more analysts anticipate Europe heading into a recession as the Russia/Ukraine crisis saps economic activity alongside high energy prices and soaring inflation.
This is a universally weak time for stocks which generally pick up around the end of October from a seasonal perspective. So, for these reasons, combined with the seasonals it does not make sense to buy European stocks ahead of the Fed’s meeting. There may, however, be compelling reasons to sell them.
Major Trade Risks: The major risk is that the Fed states concerns about slowing US growth. This can boost global stock prices.
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