Global stocks climb out of the red as traders wait on the Fed

US stock futures rose on Wednesday in fragile markets with traders on tenterhooks for any clues from the US Federal Reserve statement yesterday that rate hikes might peak and the soft landing that central banks have been angling for is in sight.

Yields on 2-month US Treasury bills jumped on rising concerns that the US Treasury Department could hit its debt limit earlier than anticipated.

Brent crude , which dropped 5% overnight, fell further and was last down about 3% at $73.04 a barrel, reported Reuters.

Tuesday saw a hammering of shares of US regional banks. PacWest Bancorp (PACW.O) dropped 27.8%, while Western Alliance Bancorp (WAL.N) tumbled 15.1% and Comerica Inc (CMA.N) fell 12.4%.

Markets are all but certain the Federal Reserve will announce a 25-basis-point rate hike when it announces its policy decision at 1800 GMT. If that happens, the focus will be on whether or how hard Fed Chair Jerome Powell pushes back on investors’ expectations for rate cuts by year’s end.

The pan-European STOXX 600 index (.STOXX) was up almost 0.5% after Tuesday’s sharp selloff. S&P 500 futures edged up 0.1% but the mood was cautious, with banks in the crosshairs.

“It’s not clear today whether markets are driven by the debt ceiling, the rout in regional banks or anxiety about the FOMC determinations,” said Vijay Modhvadia, managing director of Deuterium Capital Management.

Traders will be combing the Fed’s statement for any indication of a rate hike pause, or looking to see if the wording keeps options open for another hike in June, said Modhvadia.

US central bankers will have had an early look at the Senior Loan Officer Opinion Survey, which has not yet been released publicly, he added.

In Europe, where the crisis of confidence in banks forced Credit Suisse (CSGSN.UL) into the arms of larger rival UBS (UBSAG.UL) six weeks ago, similar data was already public with lenders sharply turning off the credit taps, a report on Tuesday showed, perhaps making a case for a smaller European Central Bank rate hike this week.

“The market consensus is for a soft landing and every hint in that direction, if you trust the Fed and the ECB, should be a source of good news for equities and credit,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers.

Markets face a “macro heavy week” said Ielpo, with investors looking back at a strong first quarter earnings season but anticipating that Friday’s U.S. jobs report might reveal a deteriorating macro economic situation.

Markets in China and Japan were shut for a holiday. Hong Kong’s shares fell down about 0.6%.

Bonds and gold held gains. The dollar, slipping, was caught in the crosswinds of falling yields and rising nerves.

Currency markets were steady and also awaiting direction from the Fed. The euro was last up 0.3% at $1.1030.

Elsewhere, the Australian dollar was flat after the previous day’s 0.5% gain following a surprise rate increase from the Reserve Bank of Australia.

Gold hovered above $2,016 an ounce, little changed on the day.