(Bloomberg) -- European stocks held steady after sliding for four straight days as investors awaited the Federal Reserve’s interest-rate decision for clues on the path of monetary policy next year.
The Stoxx Europe 600 Index was up about 0.2% by the close. The banking, technology and energy sectors outperformed, while miners and chemical stocks were the biggest laggards.
Commerzbank AG rose as UniCredit SpA said it had increased its holding in the German lender to about 28%. Credit Agricole SA edged higher as it appointed Olivier Gavalda to replace Chief Executive Officer Philippe Brassac. Renault SA jumped on reports that Honda Motor Co. and Nissan Motor Co. were exploring a merger.
An end-of-year rally in Europe has faltered amid worries about regional economic growth and political risk in key economies such as France and Germany. The Stoxx 600 is about 2.6% below a September record high.
Still, volatility is receding, with Europe’s VSTOXX gauge completely closing the gap to the S&P 500-linked VIX that had opened last month. While low investor positioning in European stocks reflects a bleaker outlook for the region, there’s growing confidence that the rally will resume.
Focus Wednesday will be on the Fed’s rate decision and signals for the policy path in 2025. Swaps traders have almost fully priced in a 25-basis-point reduction at this week’s meeting.
“In Europe, the market is stacked awaiting political clarity but the rates are very important and a dovish message today from the Fed will help some crucial sectors like the infrastructure,” said Alberto Tocchio, a portfolio manager at Kairos Partners. “Europe could be interesting as a contrarian trade for next year helped also by some political stability.”
In the UK, the FTSE 100 closed little changed. Figures earlier in the day showed inflation rose to an eight-month high in November, drifting further above the Bank of England’s 2% target and supporting expectations that it will hold interest rates at its final meeting of the year Thursday.
“There was little chance of an interest rate cut at the BOE meeting anyway, although it’s clear the economy could do with some support,” said Neil Birrell, chief investment officer at Premier Miton Investors. “The outlook for the economy remains on a bit of a knife edge.”
For more on equity markets:
- End-of-Year Volatility Drop Turns Focus to Hedging: Taking Stock
- M&A Watch Europe: BPM, Renault, Grenergy, CTT, Orsted, ProSieben
- PE Firms Aiming to Cash Out in IPOs Mull Debt Fixes: ECM Watch
- US Stock Futures Fall; Heico, Lamb Weston, DraftKings Fall
- Private Pay Packets Pop: The London Rush
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--With assistance from Michael Msika.
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