European stocks mixed after U.S. market pullback

European stocks were muted on Wednesday as investors digest global market moves, particularly a pullback in the U.S. market on Tuesday.

.FTSE FTSE 100 FTSE 6873.32 49.77 0.73 65928056
.GDAXI DAX DAX 15223.52 10.84 0.07 6948433
.FCHI CAC 40 Index CAC 6143.44 12.10 0.20 5609796
The pan-European Stoxx 600 hovered around the flatline in early trade, with travel and leisure stocks shedding 0.7% as Covid-19 restrictions tighten in mainland Europe, while telecoms gained 0.7%.

European markets are facing some uncertainty Wednesday, with investors digesting moves in the U.S. markets and the latest international growth forecasts from the International Monetary Fund.

The major U.S. averages pulled back from record highs on Tuesday to end the session in the red despite strong economic data — including March’s jobs report that beat expectations — which fueled stocks’ rise in recent sessions.

All three major U.S. averages are coming off their fourth straight quarter of gains as the economic recovery from Covid-19 accelerates. Futures indicate a slightly positive open on Wall Street later in the day.

Focus stateside on Wednesday will turn to the minutes from the latest meeting of the Federal Reserve.

“We expect the minutes to confirm that the Fed is not considering to start normalization sooner than it pledged to do so, which could allow stock indices to continue trending north,” said Charalambos Pissourous, senior market analyst at JFD Bank.

Markets are also digesting the IMF’s decision to raise its 2021 growth outlook for the global economy to 6%, up from January’s forecast of 5.5%.

It said that “a way out of this health and economic crisis is increasingly visible.” However, it warned of “daunting challenges” given the varied pace of vaccine rollouts around the world.

IMF chief economist Gita Gopinath on increasing global economic growth forecasts amid Covid recovery
Asia-Pacific markets were mostly higher Wednesday as major indexes in Australia, Japan and South Korea notched gains while stocks in mainland China and Hong Kong lost ground.

There were no major earnings released Wednesday; on the data front, euro zone final composite purchasing manager’s index data is published, Italian retail sales for February are due, as well as Dutch inflation data for March.

Sebastien Galy, senior macro strategist at Nordea Asset Management, said Wednesday would be an interesting test since there is “little to move markets” besides a Reserve Bank of India decision, European PMIs and the Fed minutes.

“It is in the silence that one can better observe underlying mechanisms. Will the dollar rally as bond curves continue to steepen and equities mildly rally which seems the more probable scenario?” Galy said.

“The temptation when reaching new highs in the stock market is a return of concerns about valuations and hence a rotation to value, but with a Fed reaction function suggesting it will be well on hold till 2023, the reflation trade simply de-anchors more from fundamentals boosted by a cyclical upswing.”

In terms of individual share price movement, French utility EDF climbed more than 6% in early trade after Reuters reported, citing union sources, that the French government is planning a minority shareholder buyout valued at around 10 billion euros ($11.87 billion).

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