European Stocks Edge Higher Ahead of Key Central Bank Meetings

European equity markets traded modestly higher on Wednesday, as investors positioned themselves ahead of a busy week of regional central bank policy decisions, while softer inflation data provided a notable boost to U.K. stocks.

By 03:05 ET (08:05 GMT), Germany’s DAX index rose 0.2%, France’s CAC 40 gained 0.2%, and the U.K.’s FTSE 100 outperformed, climbing 0.8%.

Central Banks Take Center Stage

Market focus across Europe is firmly on upcoming monetary policy meetings, as investors look for clarity on the trajectory of interest rates heading into the new year.

The European Central Bank is widely expected to leave its key interest rate unchanged at 2% on Thursday, supported by recent data suggesting a degree of resilience in the eurozone economy. Despite pressure from U.S. President Donald Trump’s aggressive trade policies, the 20-nation bloc has held up better than initially feared, with domestic demand helping to offset the impact of higher U.S. tariffs on exports.

However, signs of slowing momentum have emerged toward the end of the year. Business activity growth has cooled more than expected, with manufacturing contraction deepening and services sector growth losing steam. While November eurozone inflation data is due later in the session, it is not expected to significantly alter the ECB’s near-term policy stance.

Elsewhere, Sweden’s Riksbank and Norway’s Norges Bank are also set to deliver their final policy decisions of 2025 this week. In the U.K., easing inflation pressures are strengthening the case for further monetary easing by the Bank of England.

Data released earlier Wednesday showed annual U.K. consumer price inflation slowed sharply to 3.2% in November from 3.6% in October, marking the lowest level in eight months. On a monthly basis, prices fell 0.2%, reinforcing expectations that the disinflation trend is gaining traction.

The BoE narrowly voted 5–4 to keep interest rates unchanged at its previous meeting, but the latest inflation figures could tip the balance in favor of a rate cut. Markets are increasingly pricing in a reduction in borrowing costs to 3.75% from 4%, which would mark the lowest rate since February 2023.

Corporate Highlights

On the corporate front, Thyssenkrupp Nucera reported fourth-quarter results largely in line with its November pre-release, with sales slightly above market expectations and earnings broadly matching consensus forecasts.

In the U.K., Serco raised its profit guidance for 2025 and offered a positive outlook for 2026, citing strong performance across its government services operations.

Meanwhile, Bunzl said its adjusted operating profit for 2025 is expected to meet market expectations, despite ongoing economic challenges across several of its key markets.