World shares slip as markets await Fed rate rise

LONDON/SYDNEY, July 26 (Reuters): Stocks around the world fell on Wednesday as caution reigned ahead of an expected US Federal Reserve interest rate rise later in the day that may see rates go up to their highest since the global financial crisis.
European stocks fell as much as 0.3 per cent in early trading, with indexes in Germany and France slipped 0.2 per cent and 1.1 per cent respectively.
The Fed's July decision will be announced later on Wednesday following a two-day meeting. The benchmark rate is expected to be lifted to a range between 5.25 per cent and 5.5 per cent - roughly the highest level since the approach to the 2007-2009 financial crisis and recession.
Still, money market traders are split on the odds of another increase later in the year.
"The 25 basis point rise is a done deal. The expectation is that they will signal a pause of the next meeting," said Luca Paolini, chief strategist at Pictet Asset Management.
"The risk is that the Fed, looking at market bullishness, may not want to sound too dovish - they may want to keep the door open for more rate hikes."
The MSCI world equity index, which tracks shares in 47 countries, was flat.
On Wall Street, S&P 500 e-minis futures were flat.
In Britain, shares of lender NatWest fell as much as 3.6 per cent after CEO Alison Rose quit on Wednesday after discussing former Brexit party leader Nigel Farage's relationship with NatWest with a BBC journalist. Fellow UK lender Lloyds slipped as much as 4.8 per cent as its half-year profit missed expectations.
The yield on benchmark 10-year Treasury notes rose to 3.8905 per cent, compared with its US close of 3.912 per cent on Tuesday.
The two-year yield , which rises with traders' expectations of higher Fed fund rates, was last at 4.8703 per cent compared with a US close of 4.893 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent.
In Hong Kong, the Hang Seng index was down 0.3 per cent and China's blue chip CSI300 index was off 0.2 per cent. Positive sentiment had returned to China's market on Tuesday, when the CSI 300 Index snapped a six-day losing streak.
The gains were driven by pledges by China's leadership this week to support the economy through a "tortuous" post-pandemic recovery, but they offered very little detail on specific measures, leading to mixed feelings among investors and economists.
"We're not expecting a silver bullet in terms of any fiscal or monetary stimulus," said David Chao, Invesco's Asia Pacific strategist.