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European Equities Set for a Positive Start

European stock markets are on track to open higher Thursday morning as investors continue to analyze the U.S. Federal Reserve’s quarter-point rate cut and its implications for global monetary policy. According to early data from IG, London’s FTSE 100 is expected to rise 0.18%, Germany’s DAX could climb 0.65%, France’s CAC 40 may gain 0.37%, and Italy’s FTSE MIB is projected up 0.31% at the opening bell.

This anticipated uptick follows the Fed’s widely expected decision to lower its benchmark federal funds rate to 4.00%–4.25%, marking its first rate cut since 2020.

Fed Delivers Expected Cut, Signals Caution Ahead

The Federal Open Market Committee (FOMC) voted 11-1 in favor of the move, with only newly appointed board member Stephen Miran dissenting in favor of a deeper 50-basis-point cut. The vote showed less internal division than markets had feared, calming concerns about potential policy rifts within the central bank.

In his post-meeting press conference, Fed Chair Jerome Powell stressed that the decision was a “risk management” step, not the start of an aggressive easing cycle. While the Fed’s projections suggest two additional cuts could arrive before year-end, its longer-term outlook shows just one more reduction by 2026, far fewer than the two to three cuts traders had been pricing in for 2025, according to futures data.

The Fed’s tone signaled that rate cuts will likely remain gradual and conditional, tied closely to upcoming data on inflation, employment, and consumer spending, all of which have shown signs of cooling without collapsing. Headline inflation currently stands near 2.5%, down sharply from its 9% peak in 2022, while U.S. unemployment has edged up to 4.2% from record lows.

Global Market Reaction Mixed

Markets around the world have responded cautiously to the Fed’s decision. Asian-Pacific equities traded mixed overnight as investors weighed the slower path of U.S. policy easing. In Japan, the Nikkei 225 jumped 1.13% to a fresh all-time high, driven by strong gains in real estate and technology stocks, while other regional benchmarks showed smaller moves.

On Wall Street, the S&P 500 ended down 0.1%, the Nasdaq Composite fell 0.3%, and the Dow Jones Industrial Average added 0.6% as investors rotated into industrial and financial names and away from interest-rate-sensitive tech stocks.

Bond markets also reacted mildly, with the U.S. 10-year Treasury yield slipping from 4.25% to around 4.18%, reflecting expectations for a slower pace of Fed easing than previously assumed.

Eyes on the Bank of England

Attention now shifts to Europe, where the Bank of England (BoE) is set to announce its latest monetary policy decision later Thursday. Analysts widely expect the BoE to hold its benchmark interest rate steady at 4%, maintaining its pause as U.K. inflation has cooled but remains above target.

A steady hand from the BoE could reinforce positive sentiment across European markets, especially if investors view the combination of a cautious Fed and a patient BoE as supportive of steady economic growth without reigniting inflation pressures.

Outlook

As Thursday’s session begins, European traders appear ready to embrace a cautiously optimistic tone. While the Fed’s measured stance has tempered expectations for rapid global rate cuts, it also suggests central banks are increasingly focused on stability and predictability — a backdrop that could benefit risk assets if economic data continues to hold up.