Europe open: Shares rally with all eyes on Fed rate decision

16th Sep 2026 07:41

(Sharecast News) - European shares opened higher on Wednesday as attention was firmly focused on a rate decision from the US Federal Reserve.

The pan-regional Stoxx 600 index was up 0.4% to 636 at 0702 GMT with all major bourses following suit. Germany rose 0.35%, France 0.33%, Italy 0.61 and the UK 0.35%.

Oil prices were slightly lower despite ongoing tensions in the Middle east with Brent crude down to $107 a barrel, but still well above the $72 level in February before the war on Iran started.

US bond yields also eased with 10-year Treasuries sitting at 4.99%.

Traders have priced in a rate hike from the Fed at 93%, with new central bank chief Kevin Warsh under the spotlight not only from markets, which expect an increase, but also from US President Donald Trump, who is demanding lower rates.

Rising inflation, fuelled by surging energy and food costs due to Trump's war of choice on Iran, may well force the hand of policy makers.

"Kevin Warsh wanted the markets to guide the Fed toward a decision. This morning, the market's verdict is clear: the Fed should deliver a 25 basis point hike today. If that's the case, it would be the first rate hike in three years, and the first hike under Warsh - a decision we all know is diametrically opposed to what the current US administration would like to see," said Swissquote Bank analyst Ipek Ozkardeskaya.

"Note that the Fed didn't guide the market toward that decision. Investors guided themselves in light of the economic data and geopolitical factors. And a 25bp hike is what investors collectively think should happen, and they're positioned for it. Fed funds futures price in a more than 90% chance of a 25bp hike."

"It would be really odd - and potentially dramatic - if the Fed decided to go against that expectation. We would see a very sharp selloff in the US dollar, and potentially also in longer-term US Treasuries - and it would be quite terrible when you think that the US 10-year yield just spiked past 5% and reached levels last seen in 2007."

Reporting by Frank Prenesti for Sharecast.com