Global stocks wait on Fed minutes

Stock markets stalled and the dollar moved off a 1-month low on Wednesday as traders waited for news on just how aggressively the US Federal Reserve - the world’s most influential central bank - might jack up interest rates in the coming months.

Nerves about a global recession were jangled on Tuesday by weak US housing market data, but European and Asian trading had seen the mood gradually strengthen only to then see it splutter again.

Hints of more stimulus from China and a welcome tick up in German consumer morale initially lifted Europe’s STOXX 600 0.6per cent but it was struggling to stay in positive territory as another choppy US session loomed.

Oil was creeping up again, which along with higher food prices meant more fuel for rising inflation that central banks globally are now struggling to contain.

The US Federal Reserve has vowed to act aggressively by hiking the cost of borrowing and minutes from its most recent meeting, due at 1800 GMT, will be parsed for clues regarding the speed and extent of those actions.

Investors currently expect a series of 50-basis-point rate hikes over the next several months, stoking fears that it could easily bring the world’s largest economy to a standstill.

“From our perspective the fears of recession are real,” said Salman Baig, a portfolio manager on Unigestion’s cross-asset solutions team, adding “the Fed has a very difficult job on its hands” to engineer a “soft landing”.

The US dollar index - which measures the currency against six major rivals - and has fallen around 3per cent since hitting two-decade highs earlier this month, rebounded 0.5per cent to a level not seen since April 26.

The Reserve Bank of New Zealand became the latest central bank to raise interest rates by half a point. While that move was expected - it was its fifth in a row - it also warned bigger and faster hikes may well be needed.

“A larger and earlier increase in the (official cash rate) reduces the risk of inflation becoming persistent, while also providing more policy flexibility,” the RBNZ said in its post meeting statement. That had helped the kiwi dollar rise as much as 0.8per cent at one point to a three-week peak of $0.6514. But as the US dollar gained momentum, it ceded those gains and by 1300 GMT, traded flat at $0.6458.