FX.co ★ European Shares Seen Opening Up On China Stimulus Hopes

European stocks are poised for a robust opening on Wednesday, influenced by new data indicating a continued contraction in China's manufacturing sector for the third consecutive month in July, thereby increasing the likelihood of further stimulus measures.

At a recent Politburo meeting, Chinese leaders emphasized the importance of stimulating consumer spending and hinted at "counter-cyclical adjustments" to boost the economy.

In other regions, Japan's central bank increased its benchmark rate to 0.25 percent and unveiled a bond tapering strategy aimed at stabilizing the yen against the U.S. dollar.

Asian markets generally moved upward, although tech stocks displayed mixed performance following differing reports from industry giants Microsoft and AMD.

Oil prices experienced a near 2 percent surge in Asian trading, rebounding from a seven-month low reached on Tuesday due to concerns over China's demand. This recovery was supported by data showing another drawdown in U.S. stockpiles and news of Israel eliminating a high-ranking Hezbollah commander in a southern suburb of Beirut.

Meanwhile, the dollar index weakened, and gold prices rose as markets awaited the Federal Reserve's policy announcement and the upcoming release of ADP's report on U.S. private sector employment.

The Fed is largely anticipated to maintain the current interest rates, though its accompanying statement may offer insights into the future timing and pace of any rate reductions. According to the CME FedWatch Tool, traders have fully priced in a rate cut expected in September.

Market participants are also keenly awaiting flash inflation data for the euro area later in the day. June's inflation rate increased by 2.5 percent year-over-year, down from 5.5 percent a year earlier.

The Bank of England's rate decision, scheduled for Thursday, has the markets divided on whether the central bank will implement its first rate cut since the pandemic began.

U.S. stocks closed mixed on Tuesday as the Federal Reserve began its two-day policy session, and tech stocks faced downward pressure due to valuation worries. The tech-centric Nasdaq Composite fell 1.3 percent, marking its lowest close in over a month. The S&P 500 dipped 0.5 percent, while the Dow Jones Industrial Average rose by 0.5 percent.

In Europe, stocks closed higher on Tuesday in anticipation of significant economic data releases and global central bank meetings. The pan-European STOXX 600 increased by 0.5 percent. Germany's DAX rose by 0.5 percent, France's CAC 40 advanced by 0.4 percent, while the U.K.'s FTSE 100 edged down by 0.2 percent.