LONDON – US and European stock markets wavered on Monday as investors cautiously awaited the US Federal Reserve’s first interest-rate cut since 2020.

In New York, the Dow was up but the wider S&P 500 and the tech-heavy Nasdaq were lower shortly after opening. In Europe, London was marginally higher but all the main continental exchanges were slightly lower.

The dollar fell ahead of the rate cut announcement, while haven investment gold rose to a new record high. US stocks surged last week on positive economic news and as investors increasingly priced in a full half-point cut, with the Dow and S&P 500 reaching a whisker of their record highs.

Fed officials have widely signalled a rate cut Wednesday – the first since the Covid recession four years ago – but debate remains over whether it will be 25 or 50 basis points. The high valuations stocks hit last week leaves them susceptible to a correction, said David Morrison, analyst at Trade Nation.

“Investors appear to be pricing in a Goldilocks scenario of cheaper borrowing costs, with more rate cuts to come, in an economy which shows few signs of a hard landing or recession,” he said.

“If so, they may prove to be over-optimistic. Traders should prepare themselves for some large price swings on Wednesday evening.”

Although expectations of a 50-basis-point cut have risen, some analysts warned that decision-makers may wish to avoid giving the impression they are concerned about the health of the world’s largest economy. Worries over the Chinese economy also weighed on sentiment. Other central banks have policy meetings this week.

London’s FTSE 100 index dipped Monday ahead of the Bank of England’s own decision on borrowing costs due Thursday, one day after the Fed outcome.

The BoE is expected to keep its key rate unchanged after cutting it in August, while the European Central Bank further reduced borrowing costs last week as inflation cools. Asian stock markets fluctuated on Monday, with Hong Kong edging up but Singapore slipping. Trade was muted with holidays in Tokyo and Shanghai.

On currency markets the yen briefly hit 140.07 per dollar – its strongest level since July last year – ahead of a policy meeting at the Bank of Japan (BoJ) starting Thursday. – Nampa/AFP