European Midday Briefing: Stocks Fall as Dollar Selloff Dominates Fed Day

MARKET WRAPS

Stocks:

European shares were sharply lower Wednesday with LVMH earnings dragging down the luxury sector , even as record ASML orders boosted chip stocks .

Investors are now on high alert for any rate-cut signals from the Federal Reserve following the FOMC decision at 1900 GMT today.

The Fed is likely to hold steady for the first time since September so the focus is on Fed Chair Jerome Powell's tone at the news conference.

Commerzbank expects Powell to keep the door open for a rate cut in March.

The market currently anticipates the next rate cut to come in July, according to LSEG.

Meanwhile, the dollar continued to drop following Tuesday's slide .

Citi said the euro's strength against the dollar was back in focus and threatened to cast a cloud on European stocks .

The European Central Bank's Francois Villeroy de Galhau said the inflation impact of a weaker dollar could affect interest-rate decisions .

Data from Germany showed consumers were feeling slightly less pessimistic amid rising economic and income expectations.

Economic Insight

There is a possibility that the new Fed chair to succeed Powell could be named this week , Aptus Capital Advisors said.

Betting markets favor former Fed governor Kevin Warsh and BlackRock's head of fixed income, Rick Rieder.

The EU-India free trade agreement bolsters a trade relationship with significant growth potential and could deliver benefits beyond goods trade, HSBC said. Germany, France and Italy are set to benefit the most, it added.

Market Insight

European industrial companies are likely to be the main beneficiaries of the trade deal between the EU and India, Goldman Sachs said.

Carmakers and suppliers of chemical products and electrical machinery seem the largest short-term winners from the agreement, the bank added.

U.S. Markets:

Stock futures were mostly up early on Fed Decision Day ahead of a gauntlet of megacap earnings from the likes of Meta Platforms, Microsoft and Tesla.

The dollar on Tuesday had notched its biggest one-day decline since April's tariff turmoil after Trump said he wasn't concerned about its recent slide.

ING said any earnings misses from the tech giants "could be another source of weakness for the dollar, where so much U.S. consumption is dependent on the stock market."

Forex:

The dollar fell, staying near its weakest in nearly four years .

Even before Trump's comments, the greenback was already lower on government-shutdown fears and a weak consumer confidence survey, Deutsche Bank said.

All this added to existing concerns pushing the dollar lower, "including questions around the Federal Reserve's independence, tariff policy uncertainty and the fiscal trajectory."

ING said the dollar selloff could gather steam .

Peel Hunt said a sudden depreciation in the dollar, accompanied by rising Treasury yields, could indicate investment outflows out of the U.S. and hurt global risk markets.

The euro turned lower after surging above $1.20 on Tuesday to hit its highest level against the dollar since 2021.

Barclays strategists said the euro could rise further still .

Jefferies said the euro was nearing levels where the ECB "will start to take notice."

The Swiss franc reversed some of Tuesday's sharp gains that lifted it to its strongest level against the dollar in just over 10 years.

The yen's dramatic weekend rally sparked speculation about official intervention but the usual early indicators of such action look quiet for now , Moody's Analytics said.

With or without intervention, FX markets seemed long overdue for a course correction , Moody's Analytics said.

Bonds:

Treasury yields were little changed ahead of the Fed decision.

Morgan Stanley said Treasury auctions had remained healthy recently , with strong long-end demand and low dealer backstopping.

Government bond yield curves and yield spreads are likely to remain stuck in ranges ahead of crucial FOMC guidance later in the day, according to Commerzbank.

For Bunds, while the recovery remains an "uphill struggle," the bank stays "constructive" for duration with 10-year Bund yields near 2.90% .

Energy:

Oil prices gained further in early trading after surging about 3% in the previous session as traders monitor geopolitical risks and the impact of a massive winter storm on U.S. output.

Metals:

Gold broke through $5,200 after the dollar sank to a nearly four-year low.

The rally in the precious metal "reflects heightened geopolitical and economic risk, including shifts in U.S. policy and market stress in major bond markets, which has fuelled a debasement trade as investors seek refuge from volatile traditional assets," MUFG said.

Silver extended its rally following the dollar's decline, with investors shying away from sovereign bonds and currencies in favor of hard assets.

Citi Research said silver is likely to outperform further after rallying through $100/oz, raising its forecast for up to three months to $150/oz from $100/oz previously.

Copper

Prices rose. However, signs of weakening demand could weigh . Activity in the Chinese market is slowing ahead of the Lunar New Year holiday next month.

Iron ore

Prices were lower. Stockpiles at Chinese ports surged to their highest levels since 2022 last week, reflecting softer demand and robust supply , ANZ said. Renewed supply-side issues may limit downside.

EMEA HEADLINES

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Royal KPN Posts Higher Net Profit

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Fresnillo Cuts Silver, Gold Production Guidance After Output Falls

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The Mexico-focused silver and gold miner said Wednesday that changes to its Fresnillo mine are expected to drag on ore processing and overall ore grade, while a higher proportion of ore will be extracted from areas with narrower veins.

GLOBAL NEWS

Global Markets Mixed, U.S. Tech Futures Gain as Dollar Weakens Further

Global markets were mixed as U.S. futures largely gained, with anticipation of Federal Reserve Chairman Jerome Powell's comments overshadowed by the dollar's continued selloff. The greenback sunk to a near four-year low as gold prices cantered past $5,200 a troy ounce, with haven investors continuing to look toward precious metals and the Swiss franc. President Trump appeared to encourage the dollar's weakening in comments to the press in Iowa, as the currency recorded its biggest daily fall since April.

The Fed is due to announce its latest rates decision later Wednesday. Consensus firmly expects rates to hold steady, though investors will watch closely for comments from Powell on the institution's independence, and signaling for further rate decisions.

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SINGAPORE-China has approved purchases of Nvidia's popular H200 artificial-intelligence chip for the first time, giving authorization to several of Nvidia's Chinese customers, people familiar with the matter said Wednesday.

The long-awaited move came during a trip to China by Jensen Huang, chief executive of the American chip giant. The Trump administration said late last year that Nvidia could sell the AI chip to Chinese companies, but it had been uncertain whether Beijing would allow the sales to go through.

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January 28, 2026 05:27 ET (10:27 GMT)

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