European stocks closed lower on Tuesday, as investors remained cautious ahead of key monetary policy decisions from major central banks later this week.
Market Performance
The pan-European Stoxx 600 index fell 0.41%, with most sectors and major European bourses in the red:
- Banking stocks led the losses, declining 1.4%, reflecting investor uncertainty about interest rate adjustments.
- Technology stocks, in contrast, gained 0.61%, standing out as a rare positive performer.
Among major indexes:
- The U.K.’s FTSE 100 slipped 0.8%.
- Germany’s DAX edged down 0.3%.
- Italy’s FTSE MIB dropped 1.22%.
- France’s CAC 40 defied the trend, inching up 0.12%.
Key Focus: Central Banks’ Policy Decisions
Investors are closely monitoring developments from central banks, with the U.S. Federal Reserve, Bank of England, and other global institutions set to announce policy decisions this week.
U.S. Federal Reserve
The Fed began its final two-day policy meeting of the year on Tuesday, with a decision expected on Wednesday (December 18).
- Markets are pricing in a 95% probability of a 25-basis-point rate cut, according to CME Group’s Fed Watch tool.
- Traders also anticipate guidance on future rate decisions during Fed Chair Jerome Powell’s press conference.
Bank of England
The Bank of England will announce its policy decision on Thursday.
- Current market expectations suggest a low likelihood of a rate cut, keeping investors focused on signals about the central bank’s outlook for 2025.
Global Market Context
The cautious tone extended beyond Europe:
- Asia-Pacific markets delivered mixed performances overnight as investors digested regional economic developments.
- In the U.S., major indices traded lower on Tuesday. The Dow Jones Industrial Average appeared poised for its first 9-day losing streak since the 1970s.
As central banks take the spotlight, global markets are bracing for volatility. The outcomes of these meetings will set the tone for monetary policy heading into 2025, with implications for sectors sensitive to interest rate shifts, such as banking and real estate.
For European investors, clarity on central banks’ decisions could provide direction after a subdued trading session marked by caution.
