Europe close: Markets manage gains as Fed cuts, SNB holds

(Sharecast News) - European equities rallied into the close on Thursday after the US Federal Reserve delivered a widely expected rate cut and signalled that only one further reduction is likely in 2026, while geopolitical tensions and disappointing US tech news tempered optimism.

The pan-European Stoxx 600 rose 0.55% to 581.34, with Germany's DAX gaining 0.68% to 24,294.61, France's CAC 40 climbing 0.79% to 8,085.76 and London's FTSE 100 adding 0.49% to 9,703.16.

"Another day, another rate cut," quipped Russ Mould at AJ Bell.

"What's normally a driver for equity markets has become old news, and investors have shrugged off the Fed's latest reduction in US borrowing costs as it is becoming harder to guess where rates might go next."

The Fed voted 9-3 to lower the Federal Funds Rate by 25 basis points to a range of 3.5% to 3.75%, matching the cuts made in September and October and marking its sixth reduction since September last year.

The decision highlighted deep divisions among policymakers, with Austan Goolsbee and Jeff Schmid opposing any change, while Stephen Miran argued for a larger 50 basis point cut.

"The Federal Reserve's committee members do not see eye to eye," Mould said.

"While the central bank proceeded with an interest rate cut, two voters weren't in favour and Trump's wing man Stephen Miran continues to push for deep cuts."

Patrick Munnelly at TickMill said the move "came as no surprise" but added that "the SEP projections and press conference provided much to analyse," noting that while rate expectations were little changed, "the macroeconomic projections painted a more dynamic picture," with upgraded growth forecasts and lower inflation expectations.

European sentiment was briefly lifted before being dampened by a sharp fall in US futures after Oracle reported rising capital expenditure and weak cash flows.

"Oracle has been at the epicentre of the artificial intelligence financing debate, lacking the mammoth cash flows of the more traditional cloud giants," said Hargreaves Lansdown analyst Matt Britzman, adding that AI funding concerns and expectations of a slower pace of Fed easing were weighing on markets.

"Tech stocks were out of favour after Oracle disappointed with its latest results," Mould said.

"The slightest bit of bad news around tech has the potential to cause jitters among investors, given they're already on the edge of their seats worrying about excessive AI spending."

Munnelly echoed the market's reaction, noting that "the global market rally driven by the Fed's rate cut lost momentum after disappointing earnings from Oracle weighed on tech stocks," and highlighted that "Oracle shares, heavily tied to the AI boom, plunged more than 10% in extended trading after its second-quarter cloud revenue missed analyst estimates."

Geopolitics also loomed large after US forces seized an oil tanker off Venezuela, alleging it was used to transport sanctioned crude between Venezuela and Iran as US president Donald Trump intensified pressure on Nicol�s Maduro.

Munnelly described the broader backdrop as one where "risk appetite" had weakened, pointing to Bitcoin's decline and the drop in S&P 500 and Nasdaq futures as evidence of a more cautious tone following the initial post-Fed rally.

Swiss National Bank maintains policy rate, UK housing market subdued

Economic updates offered a mixed backdrop.

The Swiss National Bank kept its policy rate at 0%, one of the lowest among major economies, citing persistently low inflation, which eased to 0% in November.

The bank said its medium-term inflation outlook had changed little, forecasting price growth of 0.2% this year, rising to 0.6% in 2027, alongside sluggish GDP expansion.

In the UK, the housing market remained subdued as pre-Budget uncertainty dragged on confidence.

The RICS survey showed house prices at a net balance of -16 in November, with London particularly weak at -44 following a new council tax surcharge.

Respondents said uncertainty ahead of the 26 November Budget had weighed on activity, though expectations for sales and prices over the coming year improved modestly.

In the US, initial jobless claims rose sharply by 44,000 to 236,000 in the week to 6 December, exceeding forecasts, while continuing claims eased.

Munnelly noted that during the Fed's press conference, Powell "discussed the challenges the FOMC is navigating," citing data uncertainty, labour-market softening and concerns that reported job growth may be overstated.

Powell's remarks, he said, "suggested the reported +40k average job growth might actually be closer to -20k after revisions," with the unemployment rate appearing stable largely due to shrinking labour supply.

"The rate cut was intended to help stabilise these conditions," Munnelly added.

The International Energy Agency, meanwhile, trimmed its global oil supply growth forecasts for 2025 and 2026, citing stronger demand and reduced exports from Russia and Venezuela, and warned that sanctions in early 2026 could tighten refined product markets further.

Carl Zeiss reverses gains, tech stocks in the red

Among individual stocks, Carl Zeiss Meditec fell 6.16% after reversing early gains following results.

Entain dropped 2.18% as long-serving chief financial officer Rob Wood announced plans to step down.

Rheinmetall edged 0.25% higher on reports of a renewed bid for Dutch rival KNDS.

Technology shares weakened as Oracle's results reverberated across the sector, with SAP down 0.52%, ASMI off 1.09% and ASML declining 0.54%.

Reporting by Josh White for Sharecast.com.