'The real concern is what comes next': Markets are mixed as investors shift focus to the last Fed meeting of 2018

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'The real concern is what comes next': Markets are mixed as investors shift focus to the last Fed meeting of 2018

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Drew Angerer/Getty Images

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  • Global stock markets are mixed ahead of the Federal Reserve's final interest rate decision of 2018.
  • The Fed is expected to hike interest rates for a fourth time in 2018, but investors are more focused on any hints about policy going forward.
  • Any indication that further interest rate increases are coming in 2019 is likely to cause markets to slide, while, more rate hikes could trigger a slowdown in the US economy.
  • Elsewhere, oil prices have stabilized after plunging around 5% during trading on Tuesday.
  • Follow the latest in markets at Markets Insider.

Stock markets around the world are mixed Wednesday as all eyes fixate on what the US Federal Reserve has in store later in the day.

Fed chair Jerome Powell will at 2.00 p.m. in Washington announce whether the central bank has decided to go ahead with a fourth interest rate hike of the year.

The stakes are high. While the market is pricing in a 72.3% probability of the Fed hiking today, says Jasper Lawler, head of research at London Capital Group, "the real concern for the market is what comes next."

"With growing fears over the health of the global economy, the markets simply don't think the US economy can handle higher rates," he said.

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If the Fed gives an indication that it will continue along its path of rate hikes into 2019, equity markets are likely to react with sharp downward moves.

For now, however, markets remain mixed. Here's how things look out there:

  • Asian equities dropped overnight, with China's Shanghai Composite dropping 1.05%. Japan's Nikkei fell 0.6%, while other more minor Chinese indexes also losing in excess of 1%. Federal Express on Tuesday night blamed its disappointing earnings figures on a slowdown in global trade, which weighed on sentiment.
  • European stocks are cautiously higher. In the first hour of trading Germany's DAX is around 0.25% higher, while in Britain the FTSE 100 has climbed 0.5%.
  • Italian stocks have climbed sharply after reports that the government and the EU are close to agreeing a compromise on the long-running saga of the country's budget. The FTSE MIB index is higher by 1.3%, while yields on Italian government debt have dropped on the day.
  • US futures point to a cautiously optimistic start to trading stateside later in the day, with all three major indexes looking set to open around 0.5% to 0.6% higher.

As equity investors await the Fed's latest announcement, oil prices have also stabilized on Wednesday morning, following a major slump in recent days which has seen the commodity plunge to two-year lows.

Oil prices dropped 5% on Tuesday, with West Texas Intermediate, the US benchmark, dropping as low as $46 per barrel.

Read more: If you thought 2018 was bad for markets, a cocktail of fears is set to make 2019 even worse

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"Persistent concerns of oversupply and the slowing global economy hitting demand have weighed heavily on sentiment," Lawler said.

"The price of oil is showing signs of stabilizing, but we are not expecting any serious flip towards bullish sentiment."

On Wednesday, the price of WTI is 0.43% higher at $46.80, while Brent crude, the international benchmark, has climbed 0.71% to $56.66, as of around 8.55 a.m. GMT (3.55 a.m. ET).

Get the latest Oil WTI price here.

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