European stocks traded mixed on Wednesday as investors reacted to a rebound in AI and semiconductor stocks in the U.S., following a deep sell-off earlier this week.
Key Market Highlights
- FTSE 100 (^FTSE) opened mixed as tech-focused sentiment in the U.S. lifted global risk appetite.
- Nvidia (NVDA) surged 8.9%, reversing nearly half of its 17% drop on Monday, which was its worst decline since the 2020 COVID crash.
- Investors are awaiting the Federal Reserve’s monetary policy decision, where rates are expected to remain at 4.25%-4.50% following three consecutive cuts since September.
AI & Semiconductor Stocks Back in Focus
Tech and AI stocks have been a driving force behind market movements, particularly Nvidia, which is central to the AI boom. Monday’s sharp decline sparked concerns of an overbought market, but investors rushed back into AI names as dip-buying took hold.
Federal Reserve Meeting: What to Expect?
- The Fed is widely expected to keep interest rates unchanged, maintaining a cautious stance on inflation and economic growth.
- December’s “hawkish” rate cut saw officials upgrade their inflation forecasts, reducing expectations for aggressive easing.
- The market still prices in two rate cuts by December, but recent sticky inflation data has kept rate expectations stable compared to other central banks, which have seen increasing bets on easing.
Kathleen Brooks, research director at XTB, highlighted:
“US interest rate expectations have been remarkably stable, even though other central banks have seen bets on rate cuts increase in recent months.”
Market Outlook
- FTSE 100 & European Stocks: Likely to remain range-bound ahead of the Fed’s decision.
- US Equities: AI stocks, especially Nvidia, will dictate broader market moves, while Fed commentary could drive additional volatility.
- Currency & Bond Markets: US Treasury yields and the dollar will react to any Fed signals regarding future policy shifts.
With tech sentiment recovering and Fed uncertainty still looming, traders should brace for further volatility as the week unfolds.
