Europe close: Markets mixed as US Fed meeting gets underway

9th Dec 2025 15:04

(Sharecast News) - European equities gave up early gains to close mixed on Tuesday as investors shifted focus to the US Federal Reserve's final policy meeting of the year, where expectations had firmed around a 25-basis-point interest rate cut.

The pan-European Stoxx 600 slipped 0.1% to 577.77, dragged lower in late trading despite advances in several large-cap stocks.

Germany's DAX rose 0.49% to 24,162.65, while France's CAC 40 fell 0.69% to 8,052.51.

London's FTSE 100 edged down 0.03% to 9,642.01.

"The UK was an outlier on European markets on Tuesday with the FTSE 100 dipping slightly," said Russ Mould, investment director at AJ Bell.

"Whereas the rest of the main European equity indices pushed ahead, the FTSE 100 was held back by shares in British American Tobacco going up in smoke, and Tesco falling on disappointing grocery industry data."

Markets priced in an 87% chance of a quarter-point cut in the Fed funds rate, even as Australia's central bank held rates steady earlier in the day and cautioned that further increases could be needed if inflation persisted.

Patrick Munnelly, market strategy partner at TickMill, noted that "global markets adopted a cautious stance ahead of the Federal Reserve's monetary policy decision on Wednesday.

"With mixed economic data and dovish signals from some Fed officials, traders largely anticipate a 25-basis-point interest rate cut."

Exports unexpectedly rise in Germany

Economic data across Europe offered mixed signals.

German exports unexpectedly rose 0.1% in October, defying forecasts for a decline, as stronger trade with European Union partners offset weaker shipments elsewhere.

Imports fell 1.2%, helping widen the trade surplus to €16.9bn from €15.3bn in September.

Exports to EU markets climbed 2.7% month on month, but sales to the US and China dropped sharply, down 7.8% and 5.8% respectively.

In the UK, retail activity showed signs of fatigue ahead of the government's Autumn Budget.

Total retail sales grew 1.4% year on year in November, the weakest pace in six months, according to the British Retail Consortium and KPMG.

The subdued performance reflected an underwhelming Black Friday period, despite elevated inflation and heavier reliance on discounts.

Food sales rose 3%, while non-food spending eked out a 0.1% gain, supported mainly by online purchases.

Separate figures from Barclays showed households cut back on spending at the fastest rate since February 2021, with card transactions down 1.1% year on year as shoppers delayed festive buying.

Munnelly highlighted that "Barclays reported a 1.1% year-on-year drop in UK credit and debit card spending in November, the sharpest decline since February 2021 during the pandemic," adding that the BRC data "revealed that spending at major retailers grew by just 1.4% last month compared to the prior year, the slowest growth since May."

Retailers reported Black Friday transaction volumes 62.5% above an average day, yet the seasonal lift was less pronounced than in previous years.

Elsewhere in the UK consumer sector, grocery price inflation held steady at 4.7% in November, prompting more shoppers to seek promotions.

Take-home grocery sales rose 3.4%, with discounter Lidl posting a 10.2% surge, significantly outpacing larger rivals.

Online sales remained the fastest-growing channel, up 8%.

Mould observed that "new figures from Worldpanel show that Sainsbury's, Marks & Spencer, Ocado and Lidl all grew faster than Tesco in the 12 weeks to 30 November," adding that "it feels like the battle for the Christmas pound starts earlier each year, and the grocers are pulling out all the stops to ensure they're the ones catering for festivities."

He said Tesco's size affords it leverage with suppliers, but rivals "have been doing their very best to nibble at the edges and try and increase their market share."

In the United States, the latest private-sector employment data pointed to slowing momentum ahead of the Fed meeting.

Weekly ADP figures showed employers added an average of 4,750 jobs in the four weeks to 22 November, following a reported 32,000 job loss in November.

Meanwhile, optimism among small businesses improved modestly, with the National Federation of Independent Business index rising to 99.0, though respondents cited continued labour shortages and heightened uncertainty.

Investor sentiment was further tempered by policy developments in Australia, where the Reserve Bank held its benchmark cash rate at 3.6% and warned that rate cuts were not under consideration.

Governor Michelle Bullock said policymakers were prepared to tighten borrowing costs in 2026 if inflation remained above target.

Munnelly pointed out that Australian bonds "tumbled after hawkish remarks from the nation's central bank," contributing to a more defensive tone across global markets.

Thyssenkrupp in the red, defence plays make gains

In equities, Thyssenkrupp dropped 6.17% after warning of a potential €800m net loss next year due to restructuring charges at its steel unit.

Defence suppliers outperformed, with Rheinmetall up 4.07%, Renk up 5.88% and Hensoldt rising 6.15% on reports that Germany was preparing to approve €52bn of defence procurement.

Munnelly said that "defence stocks across Europe saw gains after a Bloomberg report indicated German lawmakers are set to approve record-breaking procurement contracts worth €52bn."

Eyewear giant EssilorLuxottica slid 5.7% after Alphabet subsidiary Google unveiled plans to launch AI-powered glasses in 2026, intensifying competition in wearable devices.

In the automotive sector, Volvo lost 2.09% and Daimler Truck fell 1.39% following target price cuts from Deutsche Bank.

Munnelly added that Unilever shares were also in focus after the group "announced plans to consolidate its shares, issuing eight new shares for every nine existing ones," following the demerger of its Magnum Ice Cream business, while Man Group and Moonpig rallied on upgrades and strong results.

Reporting by Josh White for Sharecast.com.