The FTSE 100 (^FTSE) started out strong on Wednesday while European stocks were muted as traders await a decision later today from the Federal Reserve and assess the ever-shifting US-China trade dynamic.

Speaking aboard Air Force One as he arrived in South Korea, Donald Trump announced that he will cut fentanyl-linked tariffs imposed on China. He said he would reduce the 20% fentanyl levy he imposed in the spring as a way to put pressure on Beijing to curb the export of precursor chemicals used in the manufacturing process, which has fuelled the opioid crisis in the US.

The US president told reporters: “I expect to be lowering that because I believe they can help us with the fentanyl situation. We have to get rid of it.”

He added: “I think we’re going to have a deal,” saying that it will be a “good deal for both”.

It comes just a day before his meeting with Chinese president Xi Jinping in the country. The Wall Street Journal reported on Tuesday that Trump was considering cutting the 20% tariff on Chinese goods to as low as 10%.

Meanwhile, later today, the US Federal Reserve is widely expected to cut interest rates by a quarter point to 4%. Traders will also have their focus on Fed chair Jerome Powell’s press conference which may shed further light on the central bank’s next moves.

  • London’s benchmark index (^FTSE) was 0.4% higher in early trade

  • Germany’s DAX (^GDAXI) was hovering around the flatline and the CAC (^FCHI) in Paris headed 0.1% into the red

  • The pan-European STOXX 600 (^STOXX) was also flat

  • Wall Street is set for a positive start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green.

  • The pound was 0.5% down against the US dollar (GBPUSD=X) at 1.3214

Follow along for live updates throughout the day:

LIVE 4 updates

  • Fed expected to cut rates again

    The US Federal Reserve is widely expected to cut interest rates, for the second time this year, by a quarter point to 4%.

    “In the absence of the official data for jobs, they’re going to lean on other sources of information, which at this point aren’t really going to contradict what they have argued as their reason for cutting,” former Kansas City Federal Reserve president Esther George said in an interview.

    Fed officials have been flying blind as the government shutdown, which began 1 October, precluded the release of the jobs report for September, arguably the most important data needed to decide the future path of monetary policy.

    Chairman Jerome Powell signalled about two weeks ago that another rate cut was possible, even as he noted monetary policy will be set meeting by meeting.

    Traders will be also focused on Powell’s press conference to shed further light on the central bank’s next moves.

  • Australia sees hotter-than expected inflation

    Australian stock markets underperforming last night, slipping around 1% on the day after hotter-than-expected inflation data that has dampened expectations for near-term policy easing.

    Inflation accelerated during the September quarter, with consumer prices rising at an annual rate of 3.2%, above the 3% consensus, and up from 2.1% in the June quarter.

    Headline inflation rose 1.3% quarter-on-quarter, marking the strongest quarterly increase since March 2023. The Reserve Bank of Australia’s preferred trimmed mean measure also surprised to the upside, increasing 1% over the quarter versus an RBA assumption of 0.6% and a recent market expectation of 0.8%.

    This pushed the annual trimmed mean rate to 3.0%, up from 2.7% in June.

    The hotter inflation print led to a sell-off in short-dated Australian government bonds, with yields on the policy-sensitive 3-year bonds climbing 12.0bps to 3.57%, and 10-year yields rising 5.1bps to 4.22%.

    The Australian dollar continued to strengthen overnight, rising for a fifth consecutive session, and trading at around 0.6597 against the US dollar, up 0.2%.

  • Asia and US overnight

    Stocks in Asia were higher overnight, supported by record closing highs on Wall Street overnight.

    The Nikkei (^N225) rose 2.2% on the day in Japan, leading the gains and reaching a new record high amid renewed optimism over US-Japan trade relations.

    The Shanghai Composite (000001.SS) was 0.7% up, and in South Korea the Kospi (^KS11) added 1.8% on the day, rebounding strongly after losses the previous session thanks to enthusiasm around AI. The Hang Seng (^HSI) was closed.

    In contrast, Australia underperformed, down 1% after hotter-than-expected inflation data that dampened expectations for near-term policy easing.

    Across the pond on Wall Street, the S&P 500 (^GSPC) rose 0.2%, and the tech-heavy Nasdaq (^IXIC) was 0.8% higher. The Dow Jones (^DJI) also gained 0.3%.

    It followed an ADP jobs report which showed a weekly average gain of 14,250 private-sector roles in the four weeks to 11 October. At a monthly pace this was a 57,000 rise, representing some stabilisation after recent slowing in the jobs market data.

    ADP will now publish weekly preliminary job estimates, offering a more high-frequency lens on labour market dynamics.

  • Coming up

    Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what’s moving markets and happening across the global economy.

    Looking ahead, today’s key events include the US Federal Reserve and Bank of Candad (BoC) decisions.

    Data releases feature US September advance goods trade balance, wholesale inventories, and pending home sales; UK September net consumer credit; Italy’s September PPI and hourly wages; and Sweden’s September GDP indicator.

    Earnings are due from Microsoft, Alphabet, Meta, SK Hynix, UBS, and others. The US will auction $30bn in 2yr FRNs. And we also have the early general election in the Netherlands.

    Here’s a snapshot of what’s on the agenda:

    • 7am: Trading updates: GSK, Glencore, BASF, Elementis, Next and Aston Martin Lagonda

    • 8am: Spain GDP flash for Q3, retail sales for September

    • 9.30am: Bank of England consumer credit for September

    • 1.45pm: Bank of Canada interest rate decision (quarter point cut to 2.25% forecast)

    • 2pm: US Pending Home sales for September

    • 6pm: US Federal Reserve interest rate decision (quarter point cut to 4% forecast)

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