European Stocks Close Higher

European stocks closed higher on Wednesday, halting sharp losses from the week amid a pause on the recent rallies in energy prices and sovereign yields. The Euro STOXX rose 0.5% to 6,267 and the STOXX Europe 600 rose 0.5% to 637. Inflationary risks in the Euro Area remained rampant and the elevated levels for sovereign yields continued to dampen credit conditions, but the pause in the slump for bonds allowed equities to enjoy some respite. Allianz, BNP Paribas, and AXA added over 1% to support the financial sector while ASML and Infineon advanced 1.3% on a strong session for AI infrastructure stocks. The Federal Reserve was due to hike its rates by 25bps after the closing bell, and a fragmented FOMC is expected to pencil a wide range of projections for the US economy in their SEP.

European stocks rose for the first time in three sessions on Wednesday, with the STOXX 50 gaining 0.6% and the STOXX 600 adding 0.4%, as a modest retreat in oil prices and stable bond yields offered investors some relief and a breather. Meanwhile, traders eagerly awaited the Fed’s monetary policy decision, with markets pricing in roughly a 93% probability of a 25bps increase in the fed funds rate. The banking sector was among the top gainers, including HSBC (+1.5%), Banco Santander (+0.8%), BNP Paribas (+1.0%), and Standard Chartered (+1.7%). HSML Holding also advanced 2.2%, while Barratt Redrow surged nearly 8% to top the STOXX 600, after its full-year results beat expectations despite trimming its home completions target for fiscal 2027. On the downside, Marks & Spencer fell 4.3% to the bottom of the main stock index. SAP (-1.2%) and L’Oréal (-1.3%) also traded lower.

European equity markets were poised to open higher on Wednesday as the recent surge in oil prices and global bond yields lost steam, providing some relief for stocks. Oil prices eased from multi-month highs after US crude inventories unexpectedly increased, while bond yields stabilized following their recent climb as investors turned their focus to key central bank decisions this week. The US Federal Reserve is widely expected to raise interest rates later today, which would mark its first hike in roughly three years. Meanwhile, the Bank of England is expected to keep rates unchanged on Thursday, despite fresh data showing UK consumer inflation accelerated to 3.1% in August, its highest level in five months. Elsewhere, markets will await Italy’s final August inflation figures, along with the latest Eurozone data on industrial production and wages. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures gained 0.4% and 0.3%, respectively.