European equities moved within narrow ranges on Thursday as traders assessed the impact of the U.S. Federal Reserve’s latest rate cut and grappled with renewed uncertainty surrounding the artificial intelligence trade.
By 03:05 ET, Germany’s DAX was down 0.3%, the UK’s FTSE 100 slipped 0.1%, and France’s CAC 40 edged up 0.1%.
Fed cuts rates but signals a cautious path ahead
The Federal Reserve lowered its benchmark interest rate by 25 basis points on Wednesday to a range of 3.5%–3.75%, in line with expectations. However, policymakers also indicated that additional cuts may be put on hold as they await clearer signs on inflation and labor-market trends.
During the post-meeting press conference, Chair Jerome Powell noted that the reductions delivered so far have pushed policy rates into “a range of plausible estimates of the neutral rate and leave it well positioned to determine the extent of further changes to rates based on incoming economic data.”
The decision revealed widening divisions within the central bank—three members dissented, with two preferring no cut at all and one advocating a larger, 50-basis-point reduction.
Analysts at Vital Knowledge cautioned that, “Two of the biggest market tailwinds in 2025 (global monetary policy easing and a unified AI momentum trade) won’t be in place in 2026, creating a much more uncertain landscape for stocks.”
Oracle disappoints, dragging on sentiment
Doubts around AI profitability deepened after Oracle (NYSE:ORCL) released results following Wednesday’s U.S. market close. The company offered weaker-than-expected guidance on both revenue and profit, and said capital spending would rise by $15 billion compared with prior projections—highlighting that heavy AI-related investments are not yet translating into the earnings growth many had hoped for.
“Despite management’s commitment to its IG (investment-grade) debt rating, AI debt funding concerns were unresolved,” Jefferies analysts wrote.
Light European earnings; Munich Re and Drax in focus
European earnings were relatively sparse, though Munich Re (TG:A289EQ) guided for €64 billion in insurance revenue for 2026, topping the €62 billion consensus and indicating stronger growth ahead. The reinsurer released the forecast alongside a new five-year strategic plan stretching to 2030, replacing its previous three-year cycle.
In the UK, Drax Group (LSE:DRX) said full-year 2025 earnings should land near the upper end of consensus expectations thanks to strong operational performance.
SNB expected to hold rates
Thursday’s European economic calendar is quiet, but markets are watching the Swiss National Bank closely as it sets policy later in the day. Analysts widely expect rates to remain at 0.0%, despite recent underwhelming inflation and GDP readings.
“The bar to a negative policy rate is high,” Nomura analysts said, suggesting the current stance could persist for some time.
Oil retreats after vessel seizure
Crude prices slipped, giving back part of Wednesday’s gains. Concerns over supply disruptions resurfaced after the U.S. seized a sanctioned tanker near Venezuela.
Brent crude fell 0.7% to $61.78 a barrel, while West Texas Intermediate dropped 0.7% to $58.05.
Oil had initially climbed after the seizure, which highlighted risks to Venezuelan exports and introduced a fresh supply premium. Investors remain attentive to Ukraine peace negotiations and the Fed’s policy outlook, as lower rates can stimulate economic activity and, in turn, bolster oil demand.
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