Wall Street stocks opened slightly lower on Wednesday as traders waited for the Federal Reserve’s final policy decision of the year. Meanwhile, the FTSE 100 (^FTSE) outperformed against its European peers.

The US central bank is widely expected to cut rates by a quarter of one percentage point later on Wednesday, which would be the third consecutive rate cut since the September meeting.

At their last meeting in late-October, chair Jerome Powell had said that a December cut was “not a foregone conclusion – far from it.”

However, since then, the jobs report for September showed a further uptick in the US unemployment rate to 4.4%, which strengthened the dovish arguments and led markets to price back in another cut. Futures are now pricing in a 90% chance of a cut.

Economists at Deutsche Bank expect there to be dissents in both a hawkish and dovish direction, anticipating “the statement and press conference will signal that the hurdle is relatively high for another cut in early 2026.”

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Joshua Mahony, chief market analyst at Scope Markets, said: “Mainland European equity markets are heading lower in a day that will be dominated by monetary policy out of the Americas. Notably, the defence sector has particularly suffered this morning, with the likes of BAE Systems (BA.L), Rheinmetall (RHM.DE), and Thales lose traction as the end of the Russia-Ukraine war comes into sight.

“Unfortunately for Europe, the peace agreement appears to be a deal Trump has formed with Russia behind the back of European leaders whom the president has labelled “weak”. Nonetheless, with Ukraine losing ground and the US seemingly giving them until Christmas to agree to a deal that sees flies in the face of many of Zelensky’s red lines.

“The latest Trump strategy document laid out a plan to focus on the Western Hemisphere, seemingly leaving allies throughout Europe and Asia to fend for themselves. Thus, while Trump’s deal may end the war in Ukraine, Europe will likely have to build up a greater degree of self-reliance which undoubtedly means increased defence spending in the years ahead.”

Elsewhere, earnings from software giant Oracle (ORCL) and chipmaker Broadcom (AVGO) are also in view this week amid lingering worries about an AI-fuelled bubble.

Pepperstone’s Chris Weston said: “Oracle may not have a substantial weight in the S&P 500 (^GSPC) or NAS100 (^NDX) to move the index on its own. But what they detail on its capex intentions and future funding plans could resonate across the AI space.”