British American Tobacco Share News (BATS)

LOOKING FOR STAGFLATION-PROOF PICKS? (1226 GMT)

With 62% of investors in the latest BofA survey expecting the global economy to enter stagflation over the next 12 months, the highest since Sept. 2008 -- it may be worth starting to look at possible stocks that could weather an environment of high inflation and flat economic growth.

BofA has some suggestions.

Strategists at the U.S. bank have picked 22 stocks they see as defensive in a stagflation scenario and look well positioned to withstand rising input costs due to their pricing power.

On the list, which you can see in the snapshot, are BAE Systems, British American Tobacco, Equinor , Merck Kgaa, Naturgy Energy, Nokia , Stmicro, Totalenergies and Vifor Pharma.

(Danilo Masoni)

FED HIKE SEEN AS INEVITABLE, FOCUS IS ON PACE (1221 GMT)

No one will be surprised to see a 25 basis points rate hike from the Fed later today, with many market players considering the move inevitable.

So what will they be looking out for?

Equiti’s Head Macro Economist Stuart Cole is interested in seeing if any committee members still vote for a 50 bps rise, a level the market expectations moved away from given the current volatility and uncertainty in Europe.

Hints about how further hikes will play out will also be on the radar.

“Possibly the key variable will be the Fed’s forecast of inflation for next year and in 2024, as this will provide the insight into whether it sees the current boost to pricing pressures as being only a short term phenomenon caused by the Ukraine crisis or something more structural,” Cole said.

With U.S. CPI data elevated and set to rise more, as well as signs of faltering consumer demand, the Fed faces a balancing act between managing inflation while protecting consumer sentiment.

“But whatever direction the FOMC opts to go in, it risks disappointing at least some of the market, as it will not be able to please both the inflation hawks or the growth doves simultaneously,” concluded Cole.

Despite questions over the extent and pace of future hikes, today’s decision seems pretty clear cut for the Fed.

“In essence this week’s Federal Reserve rate decision is probably the easiest one it will have to make this year,” said Michael Hewson, Chief Market Analyst at CMC Markets UK, who expects the 25 bps hike but also acknowledged there may be some members who still want to see that doubled.

Seven rate rises this year might be the lesser of two evils, even in light of the Russia-Ukraine conflict, according to Hewson.

"The transitory playbook seems so last year now with the Fed having to balance the risks of tightening too quickly and tipping the economy into recession or allowing inflation to do it for them by letting it rip," he said.

(Lucy Raitano)

TECH AND TRAVEL LIFT STOXX 600 AFTER CHINA SURGE (0934 GMT)

European stocks have opened strongly following a surge in Asian equities and the highest daily gain for Chinese stocks since July 2020.

The pan-European STOXX 600 index is up 2.2%, the highest level since March 3, while Germany’s DAX index is up 2.5% and Britain’s FTSE 350 is up 1.2%.

The rebound this morning comes after Beijing hinted at more Chinese stimulus, sending the country's stocks soaring. (nL2N2VJ0AW)

Technology names are the biggest gainers, up 4.%, followed by travel and leisure, up 4.1%, and financial services, up 3.3%.

Meanwhile oil and gas stocks are down 0.3%, despite oil prices ticking up 2.7%.

Luxury brands, with client bases typically heavily weighted towards China, are among today’s winners.

Cartier owner Richemont is up 8%, Hermes has gained 5.9% and Louis Vuitton owner LVMH is climbing 4.9%

(Lucy Raitano)

A (POTENTIALLY) HISTORIC DAY (0746 GMT)

The day ahead is all about the United States and Russia and possibly it's also a day of firsts, for very different reasons. So, where do we start?

Well, let's go with the least complicated and that's the United States, where the Federal Reserve is widely tipped to deliver a 25 basis point rate hike in what would be its first increase in three years.

Markets are starting to fret about just how far rates could rise given four-decade high inflation, with over seven, 25 bps rate increases in total priced in over the next year.

The language of the Fed's new policy statement and updated quarterly economic and interest rate projections will provide the first concrete guidance about how surging inflation and Russia's invasion of Ukraine has influenced policymakers, and whether it has rattled faith that the economic rebound can stay on track even as inflation is driven lower.

Now, to Russia, which is on the brink of what could be its first international debt default since the Bolshevik revolution over a century ago.

It has $117.2 million in interest payments due on two dollar-denominated eurobonds. Its finance ministry has said it will make the payments in roubles if sanctions prevent it from paying in dollars - a move markets would view as a default.

The eurobonds in question, maturing in 2023 and 2043, are among the first to have scheduled payments after Russia was hit by sanctions. The ramp up of Western sanctions and countermeasures from Moscow have raised question on whether Russia would be able, or willing, to make the payments.

An 'grace period' that allows Russia another 30 days to make the payment could drag the saga out.

Markets meanwhile are holding on to the upbeat mood that has surfaced in recent days - Asia shares have rallied, European and U.S. stock futures are up sharply,.

Chinese stocks surged after Vice Premier Liu He said more measures to boost the economy would be rolled out.

And reports that Saudi Arabia was in talks to price its oil sales to China in the Chinese currency has helped boost the yuan .

Key developments that should provide more direction to markets on Wednesday: - Data: US retail sales, import price index, export price index, business inventories, NAHB Housing Market Index, - Canada CPI, wholesale trade sales - Central banks: Fed decision - Earnings: Lennar, E.ON, Inditex - NATO defence ministers meet

(Dhara Ranasinghe)

EUROPEAN FUTURES 2% UP, TRACKING ASIA GAINS(0730 GMT)

European stocks are set to open about 2% higher this morning, tracking gains made by Asian and U.S. stocks yesterday.

The Eurostoxx 50 and DAX are about 2.1-2.2% higher, while FTSE futures FFIc1 lag slightly, up 1.6%. U.S. stock futures S&P 500 e-minis are 0.7% higher.

The uptick comes after China's blue-chip posted its biggest daily percentage gain since July 2020. Asian shares were lifted on rising hopes Beijing will roll out more economic stimulus.

Investors are keeping an eye on Ukraine-Russia peace talks, after Ukrainian President Volodymyr Zelensky said on Wednesday they were sounding more realistic but more time was needed.

The first interest rate hike from the Fed in three years is expected to be announced later today.

After a softening on Tuesday, oil prices ticked up overnight, with European benchmark brent crude up about 2.3% at $102.21 a barrel.

British PM Boris Johnson is visiting the UAE and Saudi Arabia today with the view to reducing the country’s reliance on Russian energy exports.

The war in Ukraine has seen BMW cut its 2022 profit forecast for its automotive segment,

E.ON has also said its core profit will fall this year in part due to the conflict in Europe.