FED Meeting – Nasdaq Futures Up, DAX 40 Down
Global markets are treading carefully ahead of FED’s meeting, with Dax falling while Nasdaq futures and US stock are increasing.
Quick overview
- Global markets are cautious ahead of the Federal Reserve's meeting, with the DAX declining while US stock futures rise.
- Analysts expect the Fed to maintain interest rates, emphasizing a data-dependent approach amid mixed economic signals.
- Revisions in the Fed's economic projections may indicate slower growth and persistent inflation, with potential rate cuts pushed to late 2025.
- European equity markets show a mixed performance, reflecting investor caution, while US markets gain support from falling Treasury yields.
Global markets are treading carefully ahead of FED’s meeting, with Dax falling while Nasdaq futures and US stock are increasing.
Fed Seen Holding Fire in June, Rate Cuts Deferred to Year-End
As the Federal Reserve prepares to announce its latest policy decision today, analysts widely expect no change in interest rates. Despite signs of slowing growth and easing inflation pressures, the Fed is likely to stress that it remains in a data-dependent holding pattern, cautious about acting prematurely.
Chair Jerome Powell is expected to downplay the weight of the updated economic projections, emphasizing that they remain highly contingent on evolving conditions. With the economic outlook clouded by global trade dynamics and lingering price pressures, the Fed will likely reinforce its message that both upside and downside risks remain finely balanced.
SEP Revisions Signal Slower Growth and Persistent Inflation
While the policy rate is expected to remain unchanged, the Fed’s Summary of Economic Projections (SEP) could deliver subtle signals about its evolving view on inflation and growth. Analysts anticipate that the median inflation projection for 2025 could tick up slightly to 3.0%, reflecting recent data surprises and tariff-related pressures.
In contrast, GDP growth expectations are likely to be revised lower to 1.5%, acknowledging signs of a slowdown in consumer demand and hiring. The unemployment rate could be adjusted upward to 4.5%, hinting at a softening labor market in the months ahead.
These modest shifts suggest a more cautious macroeconomic backdrop, but not one that warrants immediate easing.
Dot Plot May Hint at Slow, Measured Easing Path
The updated “dot plot”—the Fed’s internal interest rate outlook—could still show two rate cuts for 2025, likely bringing the policy rate down to around 3.875%. However, a close vote is expected, possibly revealing divisions within the committee, with some members advocating for fewer cuts.
Looking further ahead, the projections may outline two more cuts in 2026, lowering rates to 3.375%, followed by a final cut in 2027 to 3.125%. The long-run neutral rate is expected to remain anchored at 3.0%, signaling that the Fed sees no need for aggressive long-term easing.
European Stocks Mixed, US Equities Supported by Lower Yields
Across Europe, equity markets reflected a tentative tone as investors weighed inflation risks and awaited clarity from the Fed. Germany’s DAX and France’s CAC 40 slipped modestly, while southern European bourses and the UK’s FTSE 100 edged slightly higher.
In contrast, Wall Street opened stronger, buoyed by a decline in US Treasury yields across the curve. The 10-year yield fell over 4 basis points, suggesting increasing confidence that the Fed will not surprise with hawkish rhetoric. This easing in yields provided a lift to growth stocks and helped stabilize broader market sentiment.
European Market Close – June 16
- Germany’s DAX:
Closed at 23,317.81, down −116.84 points or −0.50%
▸ Investors took profit after last week’s gains; tech and autos weighed on the index. - France’s CAC 40:
Finished at 7,656.12, lower by −27.61 points or −0.36%
▸ Energy and financials declined, even as luxury stocks remained relatively resilient. - UK’s FTSE 100:
Ended at 8,843.47, up +9.44 points or +0.11%
▸ Gains driven by mining and defense stocks; pound stability helped support large caps. - Spain’s Ibex 35:
Closed at 13,923.20, up +11.50 points or +0.083%
▸ Banking names led modest gains after Spanish CPI came in broadly in line with forecasts. - Italy’s FTSE MIB (Total Return Index):
Settled at 39,418.61, up +31.39 points or +0.080%
▸ Industrials and utilities were slightly firmer, but momentum remains limited ahead of ECB updates.
Euro Market Context
Despite modest upside in southern European indices, the overall tone in Europe was cautious. DAX and CAC 40, the region’s heavyweight indices, slipped amid weaker macro sentiment and positioning ahead of Wednesday’s FOMC rate decision.
Sector rotation was evident, with defensive names showing relative strength. Traders remain wary of ECB guidance and possible adjustments to growth forecasts amid stagnating economic activity across the eurozone. Yields across the European bond market also moved slightly lower, reflecting risk-off sentiment.
US Markets – Early Session Gains
- Dow Jones Industrial Average:
Up +190 points or +0.45% at 42,406.92 - S&P 500 Index:
Up +27.63 points or +0.46% at 6,010.40 - NASDAQ Composite:
Up +120.69 points or +0.62% at 19,642.50
▸ Tech continues to lead the rally ahead of FOMC.
US Bond Market – Yields Fall Ahead of FOMC
- 2-year Treasury:
Yield at 3.918%, down 3.2 bps - 5-year Treasury:
Yield at 3.943%, down 4.4 bps - 10-year Treasury:
Yield at 4.347%, down 4.3 bps - 30-year Treasury:
Yield at 4.852%, down 4.0 bps
Trade Tariffs and Timing Complicate the Fed’s Path Forward
The Fed’s projections are also being shaped by evolving tariff assumptions. Although tariffs have increased in recent months, a slight de-escalation and softer inflation prints are expected to temper their impact on forward guidance.
Most analysts, including those at Goldman Sachs, now see the first Fed rate cut being pushed to December. The rationale is clear: peak inflationary effects from new tariffs will likely materialize during the summer, making a rate cut before then politically and economically risky. A more confident easing cycle is seen unfolding in 2026.
Conclusion: Fed to Stay the Course, but Caution Will Dominate
Today’s FOMC decision is unlikely to deliver any dramatic shift in policy. With inflation still above target, but softening, and growth moderating, the Fed is expected to remain patient and highlight ongoing uncertainty.
Markets will closely watch Chair Powell’s tone for any signs of dovishness. While the updated SEP may hint at a slightly weaker 2025 economic landscape, the overall message will remain one of caution. Unless Powell surprises with a more upbeat assessment, the impact on the US dollar is likely to be muted, and equities may continue to drift higher on expectations of a December rate cut.
German Index Dax 40 Live Chart
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