European Markets Mixed Amid Fed Anticipation and Corporate Developments

European markets displayed a mixed performance on Wednesday as investors turned their focus to the upcoming U.S. Federal Reserve decision. By mid-morning, Germany’s DAX slipped 0.1%, France’s CAC 40 remained unchanged, while the U.K.’s FTSE 100 edged up 0.2%. Market participants are widely expecting the Fed to announce a 0.25% interest rate cut, with further attention on Chair Jerome Powell’s remarks and the updated Summary of Economic Projections for insights into future monetary policy.

U.K. Inflation Rises, Dimming BoE Rate Cut Prospects

In the U.K., annual inflation rose to 2.6% in November, up from 2.3% in October, aligning with economists’ expectations. This uptick, driven largely by higher transport and energy costs, has dampened hopes for a rate cut from the Bank of England in its meeting on Thursday. The inflation surge underscores the BoE’s cautious stance as it grapples with balancing price pressures and slowing economic momentum.

The market reaction has been subdued, with yields on 10-year Gilts holding steady at 4.519%. Meanwhile, the British pound softened slightly, trading around $1.2700, down 0.07% against the U.S. dollar in early Wednesday trading.

UniCredit Expands Stake in Commerzbank, Raising Acquisition Speculation

In corporate news, UniCredit, Italy’s second-largest bank, announced on Wednesday that it has expanded its potential stake in Commerzbank to 28%, intensifying speculation about a possible acquisition of the German lender. The bank revealed that 9.5% of its holding is a direct stake, while the remaining 18.5% has been secured through derivative instruments.

UniCredit has also sought approval from the European Central Bank to increase its stake further, up to 29.9%, the threshold before triggering a mandatory takeover offer. This move comes as the Italian bank simultaneously pursues a bid for domestic competitor Banco BPM, reflecting its broader strategy to solidify its presence across Europe.

Outlook Remains Focused on Fed and ECB Decisions

With global markets waiting for clearer signals from central banks, investor sentiment remains cautious. Alongside the Fed decision, European markets are keeping a close watch on developments at the European Central Bank as policymakers assess the balance between economic recovery and inflationary risks heading into 2025.