European stocks closed higher on Tuesday, buoyed by optimism regarding the Federal Reserve's anticipated interest rate cut on Wednesday. Investors are also keenly awaiting upcoming data on inflation from the U.K. and the Bank of England's monetary policy announcement, scheduled for Wednesday and Thursday, respectively.
The general consensus is that the Federal Reserve will lower interest rates, with the primary focus being on the scale of the rate cut and the details within the central bank's corresponding statement.
The U.K. Consumer Price Index (CPI) report could play a pivotal role in shaping market speculation regarding the Bank of England's interest rate strategy for the final quarter of the year.
The pan-European Stoxx 600 edged up by 0.4%, while the U.K.'s FTSE 100 gained 0.38%. Germany's DAX and France's CAC 40 both saw an increase of 0.51%, and Switzerland's SMI closed with a 0.31% gain.
In other European markets, indices in Finland, Greece, Iceland, the Netherlands, Poland, Portugal, Russia, Spain, Sweden, and Turkey closed on a positive note. Austria and Belgium saw marginal gains, while Denmark and Norway finished lower.
In the U.K. market, Kingfisher surged by 11.25% after revising the lower end of its fiscal 2025 profit guidance upwards. EasyJet climbed over 6%, and companies like JD Sports Fashion, IAG, Ashtead Group, Burberry Group, Mondi, Howden Joinery, Prudential, Marks & Spencer, Diageo, Croda International, Pershing Square Holdings, Whitbread, Frasers Group, and Entain ended higher by 2 to 3.5%.
Conversely, BAE Systems fell by 4.7%, British American Tobacco by 2.36%, and Hikma Pharmaceuticals by nearly 2%. Pearson, Segro, Imperial Brands, and GSK also posted notable declines.
In Germany, Zalando rallied over 7%, and Siemens Energy gained approximately 4.3%. Other top performers included Daimler Truck Holding, Infineon, Bayer, Deutsche Bank, Siemens, Continental, and Sartorius, all advancing between 2 and 3.5%. BASF, HeidelbergCement, Brenntag, Volkswagen, Siemens Healthineers, Symrise, Fresenius, and Mercedes-Benz climbed 1 to 2%.
However, Rheinmetall lost nearly 6.5%, MTU Aero Engines closed down by about 2.5%, and both Hannover Rueck and Munich RE declined by about 1.6%.
The French market saw STMicroElectronics, Saint-Gobain, Edenred, and ArcelorMittal gaining 2 to 3%, while BNP Paribas, Kering, Renault, Hermes International, Societe Generale, Schneider Electric, Capgemini, Legrand, Teleperformance, Bouygues, and Accor closed higher by 1 to 1.8%. Thales ended down 3.8%, Essilor declined by about 1.25%, and Danone ended nearly 1% down.
In Switzerland, shares of chocolate maker Barry Callebaut surged sharply, following Barclays' rating upgrade of the stock to "overweight" from "underweight."
In economic news, German investor confidence plummeted once again in September, reflecting dwindling hopes for a rapid economic recovery, as indicated by survey results from the think tank ZEW. The ZEW Indicator of Economic Sentiment fell to 3.6 from 19.2 in August, reaching its lowest point since October 2023 and falling well below the forecast of 17.2.
