The Stoxx Europe 600 index showed gains after it was reported that inflation in the eurozone slowed more than economists expected in January. This suggests that the debate at the European Central Bank on how much more interest rates should be raised will be calmer. The Stoxx Europe 600 index closed January up 6.7%, its best start to a year since 2015.

The S&P 500 and Nasdaq 100 index futures are both down after rising sharply last month. The Nasdaq, on the other hand, jumped more than 10% in January. The January rally was based on expectations that the Federal Reserve would backtrack and announce an easing of its plans at the beginning of this year, after maintaining a rather aggressive policy at the end of the previous year to curb raging inflation. The employment cost index that fell short of forecasts, a cooling housing market, and the declining consumer confidence index suggest that the Fed's rate hikes over the past year have begun to curb inflation, thereby hurting the economy. While inflation looks better than it did a few months ago, the battle against inflation is far from over. At least, that is the opinion of many Federal Reserve officials.

Meanwhile, Treasury bond yields fell and the US dollar remained stable ahead of the Federal Reserve's announcement, which forecasts a 25 basis point interest rate hike.

As for other markets, bitcoin gained and returned to its bullish rally. The cryptocurrency is up nearly 40% since the beginning of the year and is now facing a serious test from the Fed. Iron ore is trading near a seven-month high as major exporter Vale SA announced lower-than-expected production in the fourth quarter. Oil continued its slight rise on Wednesday morning.

As for the S&P 500 index, the demand for risky assets remains. The index may continue to rise but it needs to return to the level of $4,064. Bulls also need to return control over $4,091. After that, we may expect a more confident upward spurt, pushing the trading instrument to $4,116. At the same time, it would be difficult to go above the level of $4,150 without the dovish rhetoric of the Fed. If the trading instrument declines and the demand narrows, bulls will have to protect $4,038. Breaking through this level, the index may drop to $4,010 and $3,980.