European Stocks Ease Ahead of Fed Decision as Earnings Deluge Continues

European equities edged slightly lower on Wednesday, as investors weighed a heavy flow of corporate earnings while adopting a cautious stance ahead of the U.S. Federal Reserve’s interest rate decision later in the day.

At 03:02 ET (08:02 GMT), Germany’s DAX slipped 0.1%, France’s CAC 40 fell 0.5%, while the U.K.’s FTSE 100 traded broadly flat.

Fed meeting keeps markets on edge

Caution prevailed across Europe despite strong overnight gains on Wall Street, where technology and AI-related shares pushed the S&P 500 to fresh record highs ahead of major U.S. megacap earnings.

The Federal Reserve is widely expected to keep rates unchanged, leaving investors focused on Chair Jerome Powell’s guidance for clues on the timing of potential rate cuts later this year.

Adding to the uncertainty, Powell’s term ends in May, and President Donald Trump said on Tuesday he will soon announce his choice for the next Fed chair. Trump has repeatedly criticized Powell for being too slow to cut rates, raising concerns that the Fed’s independence could be diluted under new leadership.

German consumer sentiment improves

In Europe, data showed a modest improvement in German consumer confidence. The GfK consumer sentiment index rose to -24.1 in February from -26.9 in January, beating expectations for a smaller increase.

The European Central Bank meets next week and is widely expected to hold rates at 2% for a fifth straight meeting, with inflation contained and the eurozone economy proving more resilient than feared.

However, Austrian central bank governor Martin Kocher warned that further strength in the euro could weigh on inflation, potentially forcing the ECB to consider another rate cut. The euro touched a more than four-year high on Tuesday amid dollar weakness driven by U.S. policy concerns.

Earnings in focus across Europe

The European earnings season gathered pace:

• ASML (AS:ASML) beat fourth-quarter forecasts and delivered upbeat guidance for 2026 after a sharp rise in orders, pointing to sustained demand from AI-related chipmakers.
• Volvo (ST:VOLVb) reported a smaller-than-expected decline in operating profit but cut its annual dividend more than forecast.
• Lonza (SIX:LONN) projected 2026 sales growth of 11%-12% with core EBITDA margins above 32%, despite FX headwinds.
• Wacker Chemie (ETR:WCHG) missed expectations and offered limited detail on a €300 million cost-cutting program.
• LVMH (EPA:LVMH) late Tuesday beat fourth-quarter sales forecasts, lifting hopes of a luxury sector rebound despite margin pressures from trade tensions and high gold prices.

Attention will also turn to Wall Street later, with Meta, Tesla and Microsoft set to report after the close.