European equity markets traded with muted direction Wednesday as investors awaited key economic data releases from the United States, including the November jobs report and upcoming figures on retail sales and inflation. The data is being closely watched for clues about the Federal Reserve’s future monetary policy, particularly after last week’s interest rate cut, which was predicated on a cooling labor market. Concerns remain, however, that the government shutdown may have distorted the data.
The pan-European Stoxx 600 was fluctuating, with defensive sectors showing relative strength while those sensitive to economic growth lagged. The FTSE MIB, CAC 40, and DAX 30 all moved into negative territory during the session. Geopolitical factors also weighed on sentiment, with attention focused on Ukrainian President Volodymyr Zelenskyy’s planned announcement regarding elections and a potential peace referendum with Russia on February 24th.
The delayed U.S. Jobs report, scheduled for release at 1330 GMT, is the primary focus. Economists caution that the data may be skewed due to the recent record-long government shutdown, potentially creating distortions in the figures. The Fed’s recent rate cut, bringing the federal funds rate to a range of 3.5% to 3.75%, signaled a shift in policy, but the central bank has emphasized its data-dependent approach. Market participants, as measured by the CME Group’s FedWatch tool, are now pricing in a greater probability of a rate cut in June.
Beyond the jobs report, the U.S. Economic calendar includes retail sales data due Wednesday and inflation figures slated for release Thursday. These releases will further inform the Fed’s assessment of the economic outlook. Meanwhile, the European Central Bank (ECB) is also under scrutiny, with its final monetary policy meeting of the year scheduled for Thursday. Market participants are increasingly debating the possibility of interest rate hikes by the ECB in 2026, and President Christine Lagarde’s comments will be closely analyzed. Analysts at State Street Investment Management suggest it will be crucial to determine whether Lagarde addresses this debate directly or chooses to contextualize it. MFS Investment Management notes that the ECB appears content to maintain its current course, balancing growth risks and inflationary pressures.
In Italy, Italgas led gains on the FTSE MIB, buoyed by positive sentiment in the utilities sector. Telecom Italia also rose following strong results from its Brazilian subsidiary, Tim Brasil, which aligned with company guidance. Banca MPS saw activity following the release of its earnings, reporting a projected profit of €3.04 billion for 2025. However, the bank also announced the resignation of Stefano Di Stefano, a non-independent board member, amid an investigation into alleged insider trading related to Mediobanca and MPS shares.
Ferrari continued its rally following the release of its 2025 results, while Stellantis faced scrutiny regarding discussions surrounding the potential dissolution of its joint venture with Samsung SDI on battery production. Generali also experienced gains after establishing a commercial partnership with Swiss Life Global Solutions and agreeing to acquire Swiss Life Network, aiming to create a leading global employee benefits network with over €3 billion in managed premiums.
Oil and gas stocks declined as oil prices fell amid ongoing negotiations to end the war in Ukraine. Equinor saw a nearly 1% decrease. The price of Brent crude futures fell 0.7% to $69.3 per barrel, while West Texas Intermediate (WTI) crude futures declined 0.8% to $64.4 per barrel. The market is awaiting further developments in potential talks between the United States and Iran, as well as Israeli Prime Minister Benjamin Netanyahu’s upcoming visit to Washington to discuss Israel’s position.
The dollar weakened slightly ahead of the U.S. Jobs report, with the euro/dollar exchange rate rising to 1.191, a gain of 0.2%. The dollar/yen pair fell 0.8% to 153.2, and the dollar/sterling pair decreased 0.2% to 0.73. Bitcoin continued its downward trend, falling 2.75% to $66,776. Precious metals rose, with gold spot prices increasing 0.58% to $2,055.8 per ounce and silver spot prices gaining 3.5% to $83.5 per ounce, driven by expectations of potential Fed rate cuts.
Asian markets showed limited movement. China’s consumer price index (CPI) rose 0.2% year-on-year in January, a slowdown from the 0.8% increase recorded in December. Producer prices, however, were in contraction. The Shanghai Composite Index edged down 0.22%, while Hong Kong’s Hang Seng Index rose 0.23%. The Japanese stock market was closed for a holiday.
The coming days will be crucial for gauging the direction of monetary policy on both sides of the Atlantic. The U.S. Jobs report, retail sales, and inflation data will be pivotal for the Federal Reserve, while the ECB’s meeting and President Lagarde’s commentary will shape expectations for European interest rates. The interplay between economic data, geopolitical events, and central bank actions will continue to drive market volatility.
