European Markets Steady as Investors Digest Corporate Earnings, Await ECB and Fed Decisions

European stock markets remained relatively stable on Wednesday as investors evaluated a series of major corporate earnings while awaiting policy decisions from both the European Central Bank (ECB) and the U.S. Federal Reserve.

As of 03:05 ET (08:05 GMT):

• Germany’s DAX rose 0.4%
• France’s CAC 40 slipped 0.4%
• UK’s FTSE 100 fell 0.2%

Key Market Drivers

1. ECB Expected to Cut Rates Amid Weak Growth

Markets are anticipating a 0.25% rate cut when the ECB concludes its policy meeting on Thursday. This would follow four rate cuts in 2023 as the central bank tries to stimulate economic growth.

Adding to concerns, Germany’s consumer confidence unexpectedly deteriorated, with the GfK consumer sentiment index falling to -22.4 in February, down from -21.4 the previous month. This reflects rising economic pessimism among German households.

2. Fed Expected to Hold Rates Steady

The Federal Reserve concludes its two-day policy meeting on Wednesday, with expectations that interest rates will remain unchanged. While inflation remains above the Fed’s 2% target, markets are watching for clues on the timing of potential rate cuts in 2025.

Investors are also reacting to Donald Trump’s call for immediate rate cuts during his virtual speech at the World Economic Forum in Davos earlier this month.

Corporate Earnings Highlights

ASML Surges on Strong Q4 Performance

• Dutch semiconductor giant ASML (AS:ASML) jumped 10% after reporting better-than-expected demand for its advanced chip-making tools in Q4 2023.
• This helped offset concerns following the global tech sell-off triggered by Chinese AI startup DeepSeek’s launch of its low-cost R1 reasoning model.

LVMH, Remy Cointreau, and Akzo Nobel Decline on Disappointing Results

• LVMH (EPA:LVMH) fell 4%, as the luxury goods giant’s sales growth failed to impress investors despite strong industry-wide performance.
• Remy Cointreau (EPA:RCOP) dropped 3%, cutting its full-year revenue outlook due to weak U.S. demand and deteriorating conditions in China.
• Akzo Nobel (AS:AKZO) lost 3%, after the Dulux paints maker gave a cautious 2025 earnings forecast, citing a lack of significant market recovery.

AB Volvo Gains on Dividend Increase

• AB Volvo (OTC:VLVLY) rose 2%, despite a larger-than-expected Q4 profit decline. Investors welcomed the truckmaker’s decision to raise its dividend payout.

Market Outlook

• ECB rate decision on Thursday could influence market sentiment, particularly for European equities.
• Fed’s policy stance will be key for global risk appetite, particularly in the bond and currency markets.
• Tech sector volatility may persist as investors assess DeepSeek’s AI developments and their impact on global AI spending.