Europe close: Stocks mixed ahead of next week's Fed meeting
By Josh White
Date: Friday 05 Dec 2025
(Sharecast News) - European shares ended mixed on Friday as investors positioned for next week's Federal Reserve meeting, where expectations have solidified around a 25 basis point interest rate cut.
The Stoxx 600 inched up 0.01% to 578.87, with sentiment supported by falling US inflation yet tempered by uneven corporate moves across the region.
Germany's DAX gained 0.66% to 24,038.71, while France's CAC 40 slipped 0.09% to 8,114.74.
The FTSE 100 lagged, losing 0.45% to 9,667.01 amid weak domestic retail data.
Policy makers on the Federal Open Market Committee meet on 9-10 December, with markets now pricing in an 87.1% chance of a rate cut.
Russ Mould, investment director at AJ Bell, noted that "the market is increasingly betting on an interest rate cut when the Federal Reserve meets on 10 December and mixed employment data this week has done little to dampen those expectations which, in turn, have helped drive recent gains for equities."
US inflation below forecasts, Germany factory orders rise
Economic data in the United States showed core inflation moderating.
The Commerce Department's personal consumption expenditures price index, the Fed's preferred gauge, registered core inflation at 2.8% for September, 0.1 percentage point below forecast.
Mould emphasised the significance of the release, saying: "The core PCE measure of inflation, out later, is one of the most closely followed by the Fed when making its decisions on rates because it excludes more volatile items like food and energy."
He added that "a higher-than-expected reading could give the Fed pause for thought about a pre-Christmas cut, while an in-line or lower number would likely give markets further confidence about such a move."
The University of Michigan's survey indicated consumer sentiment was brighter than expected in December and that inflation expectations had eased to their lowest level since January, reinforcing the case for monetary easing.
Broader macro sentiment reflected caution over inflation and labour dynamics.
On this side of the Atlantic, Germany posted another rise in factory orders, though momentum slowed.
Orders increased 1.5% in October after a revised 2.0% gain in September, well above the 0.5% consensus, according to Destatis.
Growth was driven by an 87.1% surge in transport equipment orders, including aircraft, ships, trains and military vehicles, and an 11.9% rise in basic metals.
Excluding large-scale orders, the increase would have been just 0.5%.
Three-month data showed new orders between August and October were 0.5% lower than the previous period, underscoring lingering weakness.
Domestic orders climbed 9.9%, while overseas orders fell 4.0%.
Patrick Munnelly, market strategy partner at TickMill, said the broader European outlook was set for a quieter calendar, remarking that "over in the eurozone, the week is relatively quiet, with the Sentix survey on Monday being the key aggregate data release."
UK data underlined subdued consumer activity. Retail footfall fell 0.8% in November following a 0.7% decline in October, the British Retail Consortium reported.
High streets saw a 1.2% drop, and shopping centres fell 1.3%, while retail parks slipped 0.4%.
Northern Ireland bucked the trend with a 2.7% rise.
BRC chief executive Helen Dickinson said: "Wet weather and the prospect of a tax-rising Budget meant some shoppers held off shopping visits last month," adding that Storm Claudia pushed many consumers online.
She noted improving performance in northern cities but warned that the wider picture required a strategy to revitalise high streets and shopping centres.
Munnelly noted weakening labour signals heading into the Budget, pointing out that "employment data showed weakness, with annualised employment falling -0.7% versus -0.3% in October, and future employment intentions declining to -0.2%."
UK house meanwhile price growth also stalled before the Budget.
Halifax reported prices were flat in November after a 0.5% rise in October, with annual growth slowing to 0.7% from 1.9%, the weakest pace since March 2024.
The average house price edged up to £299,892.
Amanda Bryden, head of mortgages at Halifax, said the slowdown "largely reflects the base effect of much stronger price growth this time last year" and highlighted that affordability is now at its strongest since late 2015.
She added that steady prices and expectations of lower interest rates suggest gradual growth into 2026.
Munnelly noted that "looking ahead to next week, the macro slate kicks off Monday with the UK REC report on jobs," underscoring that while some data are unlikely to shift expectations, Friday's monthly GDP and output releases "offer substantial insights."
Ocado manages gains, Swiss Re in the red
Corporate movers were mixed.
Ocado Group rose 0.27% after Kroger agreed to pay $350m in compensation for closing three automated warehouses designed by the UK technology firm.
Mould said that while the original partnership once generated significant excitement, "the relationship has soured somewhat," adding that "an enhanced compensation payment does at least take the edge off Kroger's reduced use of Ocado's technology, as does Ocado's reiteration of guidance for a break into positive cash flow next year."
He suggested that although Ocado "may not match the ambitions once touted for it, a more disciplined approach could still underpin a successful business."
Greggs jumped 5.85% after JPMorgan sounded a more optimistic tone on the bakery chain.
On the downside, Swiss Re slumped 6.53% as investors reacted to new 2026 financial targets, including a $4.5bn profit goal and plans for at least 7% annual dividend growth over the next two years, leaving the reinsurer at the bottom of the Stoxx 600.
Reporting by Josh White for Sharecast.com.
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