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European equities traded without clear momentum on Tuesday, with investors cautious ahead of major central bank decisions scheduled for the final month of the year.
By 03:05 ET (08:05 GMT):
- Germany’s DAX rose 0.1%
- UK’s FTSE 100 added 0.1%
- France’s CAC 40 slipped 0.1%
Global Monetary Policy in Focus
European markets opened December on a softer note on Monday, but major indices remain on track for strong full-year gains amid growing expectations of a U.S. Federal Reserve rate cut next week.
- DAX and FTSE 100 are both set to end 2025 with gains of over 18%
- CAC 40 lags with roughly 10% gains, weighed by political uncertainty
According to CME’s FedWatch Tool, traders now assign an 87.2% probability that the Fed will cut rates by 25 basis points at the December 9–10 meeting.
The Bank of England is also widely expected to ease policy this month, with inflation cooling and growth faltering—especially after the tax increases laid out in last week’s Autumn Budget.
In the eurozone, flash inflation data due later Tuesday is projected to show annual inflation hovering just above the ECB’s 2% target. However, markets largely expect the ECB to hold rates through 2026, meaning the data is unlikely to alter the outlook significantly.
Buybacks Poised to Drive European Momentum in 2026
Beyond monetary policy, analysts at Barclays see substantial potential for renewed momentum in European equities next year, driven by aggressive corporate share repurchases.
Key findings from Barclays’ latest note:
- European companies repurchased €19.3 billion in shares in November 2025 — near the highest monthly level since 2017
- Buybacks represented 2.3% of total European equity trading volume
- Energy and financial firms accounted for more than 2.5% of volume via buybacks alone
- Q4 execution levels are running above historical averages
A major tailwind is the large unexecuted capacity still available:
- Roughly 70% of 2026 buyback programs remain outstanding
- Barclays’ models project about €50 billion in new buyback announcements in Q1 2026
The bank expects 8% earnings-per-share growth for European equities in 2026, with automakers, telecoms, and energy companies offering the strongest free cash flow yields heading into the year.
