European Stocks Edge Higher as Markets Brace for Fed’s Key Policy Meeting

European stocks posted modest gains on Tuesday, with investors cautiously optimistic ahead of the Federal Reserve’s highly anticipated policy-setting meeting, which begins later today. By 07:05 GMT (03:05 ET), Germany’s DAX rose by 0.4%, France’s CAC 40 gained 0.5%, and the U.K.’s FTSE 100 climbed 0.8%. Market sentiment suggests a shift towards a more dovish stance from the Fed, raising expectations of a potential rate cut.

All Eyes on the Federal Reserve Meeting

The Federal Reserve kicks off its two-day meeting today, with markets widely anticipating the first rate cut in four years to support economic growth. While uncertainty lingers over the scale of the rate reduction, many traders are betting on a more aggressive 50 basis point (bps) cut rather than the more traditional 25 bps. According to CME FedWatch, there is a 68% likelihood of a 50 bps cut, while a 25 bps cut has a 32% chance. Additionally, policymakers at the Bank of England and the Bank of Japan are set to meet later this week, making it a pivotal moment for global monetary policy.

German ZEW Survey and U.S. Retail Data Under Scrutiny

Before the Fed’s decision, market participants are watching the release of Germany’s ZEW economic sentiment index, which is expected to show a slight decline as Europe’s largest economy continues to face headwinds. Meanwhile, U.S. retail sales data for August is projected to show a month-on-month contraction, but investors may discount the report in light of a possible rate cut by the Fed.

EssilorLuxottica Extends Partnership with Meta

In corporate news, shares of EssilorLuxottica (EPA) rose 0.5% after the eyewear giant announced an extension of its partnership with Meta Platforms (NASDAQ). The companies signed a new long-term agreement to continue developing smart eyewear into the next decade. Their collaboration, which began in 2019, has produced two generations of Ray-Ban-branded smart glasses, combining fashion and technology.

Kingfisher’s Shares Surge Following Profit Outlook Upgrade

Kingfisher (LON) saw its stock rise over 5% after the European home improvement retailer reported flat first-half profits, which were impacted by weak demand for large discretionary purchases. However, the company raised its full-year profit outlook, providing a boost to investor confidence.

Crude Prices Strengthen as Hurricane Disruptions Continue

Oil prices moved higher on Tuesday, driven by ongoing disruptions to U.S. crude production following Hurricane Francine. At 03:05 ET, Brent crude rose by 0.5% to $73.12 per barrel, while U.S. West Texas Intermediate (WTI) gained 0.7%, reaching $68.48 per barrel. The aftermath of the hurricane has kept over 12% of crude production and 16% of natural gas output in the Gulf of Mexico offline, according to the U.S. Bureau of Safety and Environmental Enforcement. With the Federal Reserve’s expected rate cut adding to market optimism, traders are also awaiting the American Petroleum Institute’s weekly inventory data, which is expected to show another decline in U.S. crude stockpiles. Markets are closely monitoring these developments as they signal broader trends in both economic and energy sectors.

Von der Leyen Prepares to Unveil New European Commission Leadership

European Commission President Ursula von der Leyen is set to announce the key appointments in the EU’s executive branch on Tuesday, determining which national representatives will take charge of major portfolios such as trade, competition, and climate policy. As the most influential institution within the 27-nation European Union, the Commission holds the authority to propose new laws, oversee corporate mergers, and negotiate international trade agreements. Each EU member state will secure a position within the Commission, akin to a ministerial role. However, the significance of these positions varies depending on the assigned portfolio, with sectors like trade, competition, energy, and the internal market carrying substantial influence over businesses and consumers across the bloc.

The next European Commission is expected to assume office by year-end, aligning with a critical juncture: the outcome of the U.S. presidential election in November. A second Trump presidency could challenge the EU’s unified stance on supporting Ukraine against Russian aggression and disrupt trade relations with the U.S., the world’s largest economy. Beyond the political landscape, the new Commission will face the urgent task of addressing the diminishing competitiveness of European industries, particularly as rivalry with China intensifies over green technologies such as electric vehicles.

Tensions Ahead of New Commission Line-Up

A notable shake-up occurred on Monday when France replaced its candidate, Thierry Breton, with Foreign Minister Stephane Sejourne after Breton abruptly resigned, issuing sharp criticism of von der Leyen. Spain’s nominee, Teresa Ribera, currently serving as the ecological transition minister, is reportedly a contender for a senior role. Meanwhile, Poland’s Piotr Serafin is expected to oversee the EU budget, and Lithuania’s Andrius Kubilius is tipped to become the EU’s inaugural defense commissioner, a new role aimed at bolstering Europe’s defense industry in response to Russian aggression on its eastern borders. However, final appointments are subject to last-minute negotiations, with the gender balance within the Commission proving a complicating factor. Von der Leyen had urged EU governments to nominate both male and female candidates to ensure gender parity, but the current tally stands at 17 men and 10 women—an improvement, yet still falling short of the desired balance.

Once the nominations are finalized, each candidate must undergo a hearing in the European Parliament, where lawmakers will scrutinize their qualifications and extract commitments for their future role. While the Parliament has the power to reject nominees, Hungary’s Oliver Varhelyi is expected to face particularly tough questions during his hearing, potentially complicating his approval. The final make-up of von der Leyen’s new team will set the tone for the EU’s policy direction over the next five years, particularly in the critical areas of trade, defense, and green technology.