LONDON – October 29, 2025 (Market Insider) — European stocks turned lower on Tuesday as investors shifted to a cautious stance ahead of the U.S. Federal Reserve’s interest rate decision and a flurry of corporate earnings that underscored a fragile economic outlook.
By mid-morning in London, the pan-European Stoxx 600 was down 0.4%, with most major bourses and sectors in negative territory. Utilities — often viewed as a defensive safe haven — were among the few gainers.
Markets Pause After Strong Run
The pullback follows a brief rally on Monday, driven by optimism that U.S.–China trade tensions could ease ahead of a highly anticipated meeting between President Donald Trump and Chinese President Xi Jinping in South Korea later this week.
Both leaders are expected to meet on the sidelines of the APEC Summit, after reportedly agreeing on a framework addressing rare earth exports, agricultural imports, and TikTok’s operations.
“I have a lot of respect for President Xi, and we are going to come away with a deal,” Trump said Monday.
Spain’s IBEX 35 briefly hit its highest level since 2007 before paring gains, while London’s FTSE 100 and Germany’s DAX both slipped modestly.
Corporate Earnings in Focus
Pharmaceutical heavyweight Novartis fell 3.4% after posting third-quarter results that missed analyst expectations. Despite reporting a 7% rise in constant-currency sales and a 25% jump in net income to $3.9 billion, the figure was below the $4.4 billion forecast by analysts polled by LSEG.
French lender BNP Paribas also slid 2.7%, even after beating profit estimates with €4.28 billion in pre-tax income, compared to the expected €3.44 billion. The bank cited a “specific credit situation” that increased risk costs in its Global Markets division.
Meanwhile, HSBC gained 3% in London after delivering stronger-than-expected third-quarter results, providing a rare bright spot in an otherwise cautious trading day.
U.K. Fiscal Worries Resurface
Adding to investor unease, the Financial Times reported that Britain’s Office for Budget Responsibility (OBR) is set to downgrade its productivity forecast, potentially adding £20 billion ($26.6 billion) to the nation’s fiscal shortfall. Finance Minister Rachel Reeves faces the prospect of a £50 billion budget gap ahead of her Autumn Budget next month.
The British pound slipped 0.2% against both the dollar and the euro, while U.K. gilt yields fell slightly across the curve. The 30-year gilt yield remains above 5%, the highest among G7 economies.
All Eyes on the Fed
The main event for global markets this week is the Federal Reserve’s two-day policy meeting, which begins Tuesday. Investors overwhelmingly expect a 25 basis-point rate cut, with CME FedWatch data showing a 96% probability.
Traders are now looking for guidance from Fed Chair Jerome Powell on whether another cut could follow in December amid growing signs of a softening U.S. labor market.
The Fed faces an additional challenge: a government data blackout caused by the ongoing U.S. government shutdown, leaving officials with limited fresh economic data — aside from last week’s inflation report — as they weigh their next move.
Reporting by Market Insider, with contributions from CNBC and LSEG data.
