European Stocks Close Higher Ahead Of Fed Rate Decision

Despite concerns about economic slowdown, rising interest rates and geopolitical tensions, European stocks moved higher on Wednesday.

Markets looked ahead to the Federal Reserve's interest rate decision, due later in the day. The Fed is widely expected to hike interest rates by 75 basis points. Some analysts expect the rate to be hiked by as much as 1%.

CME Group's FedWatch Tool is currently indicating an 84% chance of a 75 basis points rate hike and a 16% chance of a 100 basis point rate hike.

Worries about geopolitical tensions weighed on stocks earlier in the day. Russian President Vladimir Putin announced a partial military mobilization in the country, bringing geopolitical tensions to the forefront.

In a televised address, Putin said the partial mobilization of its 2 million-strong military reserves was to defend Russian territories, claiming the West wants to destroy Russia and did not want peace in Ukraine.

The pan European Stoxx 600 climbed 0.9%. The U.K.'s FTSE 100 surged 0.63%, Germany's DAX gained 0.76% and France's CAC 40 advanced 0.87%, while Switzerland's SMI drifted down 0.52%.

Among other markets in Europe, Belgium, Denmark, Finland, Ireland, Netherlands, Norway, Poland, Portugal and Sweden ended higher.

Czech Republic, Greece, Iceland, Russia and Turkiye closed weak, while Austria and Spain settled flat.

In the UK market, Hargreaves Lansdown rallied 5.7%. Persimmon, BAE Systems, Schrodders, Taylor Wimpey, 3I Group, Halma, Barratt Developments and Ashtead Group gained 3 to 5%.

Airtel Africa, Spirax-Sarco Engineering, RightMove, Harbour Energy, Experian, Croda International and Vodafone Group also moved up sharply.

Ocado Group drifted down more than 5%. IHG and IAG both shed about 3.3%. Whitbread, Rolls-Royce Holdings, Natwest Group, Flutter Entertainment, Barclays, HSBC Holdings, BT Group and Lloyds Banking Group declined 1 to 2.3%.

In the German market, Infineon Technologies, Puma and Symrise gained 2.5 to 2.7%. MTU Aero Engines, E.ON, Linde, Siemens, Sartorius, SAP, RWE and Munich RE advanced 1.2 to 2%.

HelloFresh dropped 3%. Fresenius, Deutsche Post, Deutsche Bank and Continental also ended notably lower.

In Paris, Thales rallied 4%. WorldLine, STMicroElectronics, Veolia, Teleperformance, Air Liquide, Dassault Systemes, Legrand, Hermes International, Schneider Electric, Engie, Airbus Group and LVMH gained 1.5 to 3.6%.

Accor, Renault, Carrefour, Air France-KLM, Valeo, Societe Generale and BNP Paribas lost 1 to 4%.

On the economic front, the UK budget deficit exceeded the official estimate in August, despite a notable increase in tax revenue, as high inflation raised the debt servicing costs, data published by the Office for National Statistics revealed.

Public sector net borrowing excluding public sector banks declined to GBP 11.8 billion from GBP 14.4 billion last year.

However, this was GBP 5.8 billion more than the GBP 6.0 billion forecast by the Office for Budget Responsibility and also GBP 6.5 billion more than in pre-coronavirus period. The level expected by economists was GBP 8.45 billion.

UK manufacturers reported a marginal fall in production in the three months to September but they expect a much sharper decline over the coming three months, monthly Industrial Trends Survey from the Confederation of British Industry and Accenture showed.

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