European equity markets closed higher overnight, boosted by optimism about an anticipated Federal Reserve (Fed) rate cut and a preliminary United States (US)-China trade framework agreed over the weekend.
In the United Kingdom (UK), the FTSE 100 hit a fresh record high of 9672 before closing 0.08% higher at 9653, continuing its rally following last week’s cooler-than-expected UK inflation report, which showed core inflation at 3.5% year-on-year (YoY) in September (below the 3.7% expected).
This has fuelled expectations of further Bank of England (BoE) easing before year-end, with the UK rates market now showing a 15 basis point (bp) probability of a 25 bp rate cut for the BoE’s December meeting.
DAX faces challenges from international tensions
DAX 40 gained 0.28% to 24,307 ahead of Thursday’s European Central Bank (ECB) meeting. While the DAX outperformed the FTSE 100 overnight, it is poised to underperform the FTSE 100 and its global peers again this month.
Global indices performance month-to-date (MTD):
Nikkei 225: +12.42% MTD
Korea Composite Stock Price Index (KOSPI): +16.48% MTD
Nasdaq Composite Index (Nasdaq): +4.63% MTD
Cotation Assistée en Continu (CAC 40): +4.18% MTD
FTSE 100: +3.24% MTD
Australian Securities Exchange 200 (ASX 200): +1.94% MTD
DAX: +1.79% MTD
China Securities Index 300 (CSI 300): +1.62% MTD
The DAX’s underperformance likely stems from persistent investor caution over Germany’s vulnerability to US tariffs, uncertainty about further ECB rate cuts, and concerns over escalating conflict in Ukraine, especially after President Zelenskyy signalled intensified long-range strikes on Russian energy infrastructure.