Stock markets drift on eve of Fed rate call

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Global stock markets traded mixed on Tuesday on uncertainty over the US Federal Reserve's plans for interest rates next year.

While Wall Street drifted higher in late morning trading, Europe's main markets were mixed and Asia ended the day mostly lower.

"The week so far has been indecisive at best, but early trading in the US has seen some tentative buying," said Chris Beauchamp, chief market analyst at IG trading platform.

With traders fully confident of a US rate reduction Wednesday, observers said they would be keeping a close eye on the central bank's so-called "dot plot" of projections for monetary policy into 2026 that will also be released.

"Previews have been teasing the likelihood of the Fed checking in with a 'hawkish cut,' which is to say it will cut rates by 25 basis points but then signal that it is unlikely to cut rates again soon," said Briefing.com analyst Patrick O'Hare.

Bets on a third successive cut -- and more in 2026 -- had surged on data pointing to a weakening jobs market, which offset concerns about stubbornly high inflation.

That optimism was boosted last month by reports that US President Donald Trump's top economic aide Kevin Hassett -- a proponent of more cuts -- was the frontrunner to take the Fed's helm when Powell's term ends.

However, the excitement has calmed in recent days following a slightly higher-than-expected US inflation reading.

Bloomberg reported that markets are pricing in two more rate reductions next year, down from the three expected last week.

"As markets digest fewer global rate cuts going forward, it may cause stock markets to stall, especially as US markets approach record highs," said Kathleen Brooks, research director at XTB.

On the corporate front Tuesday, chipmakers traded mixed after Trump said he had reached an agreement with his Chinese counterpart Xi Jinping to allow Nvidia to export advanced artificial intelligence chips to China.

Shares in Nvidia slid 0.3 percent after having risen on Monday ahead of the announcement.

The announcement marks a significant shift in US export policy for advanced AI chips, which Trump's predecessor Joe Biden had heavily restricted over national security concerns.

Biden's administration required chip companies to create modified, less powerful versions specifically for the Chinese market.

Investors also kept a close watch over the bidding war for Warner Bros. Discovery after Paramount on Monday launched an all-cash tender offer for the Hollywood giant, in a challenge to Netflix's offer.

Paramount's bid of $108.4 billion trumps Netflix's offer of nearly $83 billion, which targets, however, a smaller part of the company.

Ahead of Wall Street reopening, Google hit out at a European Union antitrust probe launched Tuesday into the tech giant's use of online content to train and provide AI services.

Shares in Google parent company Alphabet edged 0.2 percent higher.

New York - Dow: UP 0.3 percent at 47,874.40 points

New York - S&P 500: UP 0.2 percent at 6,859.40

New York - Nasdaq Composite: UP 0.1 percent at 23,570.86

London - FTSE 100: FLAT at 9,642.01 (close)

Paris - CAC 40: DOWN 0.7 percent at 8,052.51 (close)

Frankfurt - DAX: UP 0.5 percent at 24,162.65 (close)

Tokyo - Nikkei 225: UP 0.1 percent at 50,655.10 (close)

Hong Kong - Hang Seng Index: DOWN 1.3 percent at 25,434.23 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,909.52 (close)

Euro/dollar: UNCHANGED at $1.1640

Pound/dollar: DOWN at $1.3313 from $1.3328 on Monday

Dollar/yen: UP at 156.91 yen from 155.86 yen

Euro/pound: UP at 87.42 pence from 87.34 pence

Brent North Sea Crude: DOWN 0.8 percent at $62.02 per barrel

West Texas Intermediate: DOWN 1.0 percent at $58.31 per barrel