In Asian Equity Markets stocks were in a pensive mood on Wednesday as shell-shocked investors waited to see just how aggressive the Fed would be on rates, with many fearing drastic action would risk tipping the world into recession. MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.2 percent. Japan’s Nikkei lost 0.6 percent, though sentiment was helped by a survey showing an improvement in confidence among Japanese manufacturers. Data on Chinese retail sales and industrial output for May were a little better than forecast, but still showed the drag from coronavirus lockdowns.

In Currency Markets the dollar held near its overnight 20-year peak on Wednesday ahead of the outcome of the Fed policy meeting at which markets are pricing in an outsized 75 basis point interest rate hike as policymakers try to rein in rampant inflation. A key U.S. currency index was at 105.3 having hit 105.65 on Tuesday, its strongest since December 2002. Sterling was at $1.20135 after falling to a 15-month low versus the dollar at $1.1934 the previous day. Against the Japanese yen, the dollar hit a fresh 24-year low of 135.58 per dollar in early trade, before recovering to 135.05.

In US Equity Markets the S&P 500 ended lower on Tuesday as the index was unable to bounce from a sharp sell-off in the prior session with a key policy statement from the Fed on deck that will reveal how aggressive the central bank’s policy path will be. The Dow fell 0.5 percent, to 30,364.83, the S&P 500 lost 0.38 percent, to 3,735.48 and the Nasdaq Composite added 0.18 percent, to 10,828.35. FedEx Corp rose 14.41 percent after raising its quarterly dividend by more than 50 percent, while Oracle Corp gained 10.41 percent after posting upbeat quarterly results on demand for its cloud products.

In Commodities Markets oil prices settled lower on Tuesday on fears the U.S. Federal Reserve will surprise markets with a higher-than-expected interest rate hike. Brent crude futures settled down 0.9 percent, to $121.17 a barrel. U.S. West Texas Intermediate (WTI) crude fell 0.7 percent, to settle at $118.93 a barrel. Spot gold fell 0.4 percent to $1,811.59 per ounce. Silver fell 0.4 percent to $20.96 per ounce and platinum shed 1.6 percent to $918.51. Palladium rose 1.2 percent to $1,817.57, having hit a near six-month low earlier in the session.

In European Equity Markets stocks reversed early gains on Tuesday to extend their selloff for a sixth straight session on worries over aggressive U.S. interest rate hikes and a potential recession. The continent-wide STOXX 600 index declined 1.3 percent after sliding 2.4 percent to over three-month lows on Monday. Health care and industrial stocks led sectoral losses in Europe, while battered banks edged 1.1 percent higher. Consumer discretionary stocks like Ocado and Kingfisher fell 10.8 percent and 4.4 percent, respectively, on concerns of stagflation and worries of weaker consumer spending.

In Bond Markets U.S. Treasury yields climbed to their highest levels in a decade on Tuesday as investors raised bets that the Federal Reserve will hike rates by 75 basis points when it concludes its two-day meeting on Wednesday. Yields on 10-year Treasury Inflation-Protected Securities (TIPS), known as real yields, hit 0.857 percent on Tuesday, the highest since Feb. 2019. Five-year TIPS yields reached 0.686 percent, the highest since March 2020. Two-year Treasury note yields reached 3.439 percent, the highest since Nov. 2007. Benchmark 10-year notes hit 3.475 percent, the highest since April 2011.