Europe midday: Shares flat as investors eye Fed policy meeting

(Sharecast News) - European stocks were flat at midday on Monday as traders and investors turned their attention to the US Federal Reserve's monetary policy decision this week which is widely expected to result in a 25-basis point cut in interest rates.

The pan-regional Stoxx 600 index was down 0.02% at 578.6. Fed policy makers will gather on Tuesday for a two-day meeting amid a weak labour market and incomplete data picture due to the federal government shutdown.

"Anything other than a quarter point cut to Fed Funds Rates on Wednesday will come as a big surprise but cast your eyes forward 12 months and the waters become much muddier," said Hargreaves Lansdown analyst Derren Nathan.

"Markets see two further quarter point cuts as the most likely outcome but the probability of a doveish third cut, or just a hawkish single cut isn't that far behind. It's commentary for 2026 and beyond that's likely to be the key focus for markets."

"With US jobs under pressure, inflation still above target, and lending rates 1.5 percentage points below the peak, already it's a balancing act that's becoming ever trickier. One thing looks certain, the days of sub 1% rates borrowers became accustomed to post the Great Financial Crisis are over with theoretical 'neutral' rates more likely to be in the 3% region."

In equity news, defence stocks made gains as a US-authored "peace deal" to end the war in Ukraine appeared to be stalling. Rheinmetall, Renk and Hensoldt were all higher.

Reporting by Frank Prenesti for Sharecast.com