(Sharecast News) - European equities ended mixed on Wednesday as investors awaited the outcome of the US Federal Reserve's two-day policy meeting, where a widely expected 25-basis-point interest rate cut had shifted attention toward guidance on the future path of monetary policy.
Dan Coatsworth, head of markets at AJ Bell, said markets were effectively marking time, noting that "markets were in a holding pattern ahead of the Fed's interest rate decision later today."
The Stoxx 600 edged up 0.07% to 578.17, supported by selective gains across consumer-facing stocks, while sentiment was tempered by weakness in defence shares.
Germany's DAX slipped 0.13% to 24,130.14, France's CAC 40 fell 0.32% to 8,022.69 and London's FTSE 100 rose 0.14% to 9,655.53.
Traders largely expected the Fed to cut its benchmark rate on Wednesday, though markets remained focused on comments from chair Jerome Powell amid signs of a weakening US labour market and inflationary pressures stemming from the government's global tariff measures.
Patrick Munnelly at TickMill said the broader backdrop reflected caution on Wall Street, where "traders held back from making bold moves ahead of the Federal Reserve's final interest-rate decision of 2025," adding that investors were increasingly sensitive to the risk of a so-called hawkish cut.
He said the central bank may lower rates "but [signal] it may hold off on further reductions for now," with the Fed's outlook for 2026 now viewed as central to market direction.
Mortgage applications rise stateside, China inflation hits 21-month high
In economic news, data showed mortgage applications in the United States rose 4.8% in the week to 5 December, driven by a 14.3% jump in refinancing activity, as the Federal Housing Administration's 30-year fixed-rate mortgage fell to 6.08%, its lowest level since September 2024.
Coatsworth suggested that the real market interest lay beyond today's move, saying "a quarter point rate cut is widely expected, but more interesting to the market will be commentary on the direction of rates in 2026.
"There have been conflicting signals from the Fed about monetary policy and markets are keen to see if there is more joined up thinking from the central bank."
Economic developments in Canada and China also shaped the backdrop.
The Bank of Canada left its key interest rate unchanged at 2.25%, saying policy was "about the right level" to keep inflation near target and support economic adjustment, but warned that uncertainty remained high.
In China, consumer inflation reached a 21-month high of 0.7% year on year in November due to surging food costs, though producer prices fell 2.2%, underscoring persistent deflationary pressures and ongoing supply gluts in several heavy industries.
Munnelly said Asian markets mirrored the global wait-and-see stance, noting that "Asian markets remained steady as investors also await clues on the Federal Reserve's next move regarding interest rates in its final decision of the year."
Defence stocks down, Delivery Hero in the green
In equities, defence stocks were among the weakest performers after reports suggested Ukraine was under increased pressure to accept a US-Russia peace proposal.
BAE Systems fell 2.09%, Rheinmetall dropped 2.56%, Renk declined 3.98%, Hensoldt lost 2.09%, Saab slipped 1.17% and Thales shed 2.1%.
Scope Markets analyst Joshua Mahony said the ultimatum for Kyiv raised doubts about long-term Western support, adding that while a deal "may end the war in Ukraine, Europe will likely have to build up a greater degree of self-reliance which undoubtedly means increased defence spending in the years ahead."
On the upside, Delivery Hero surged 13.96% after the German food delivery group said it was reviewing strategic options and prioritising financial improvements.
Anglo American gained 0.12% after shareholders approved its merger with Teck Resources to create one of the world's largest copper producers, which Deutsche Bank analysts said offered a compelling long-term growth story.
Coatsworth said the deal now entered a critical execution phase, warning: "Now comes the hard part - living up to the hype at the heart of the merger rationale.
"Big deals are notoriously value-destructive, either because management over-estimated cost synergies, culture clashes rear their ugly head, or financial returns fall short."
He said the enlarged miner "will be a big player in the copper market, where the outlook for the metal price is red hot," though operational missteps could derail forecasts.
In Paris, LVMH advanced 0.41% after a labour union at its champagne units called for a strike on Thursday to press for year-end bonuses.
Reporting by Josh White for Sharecast.com.
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