European Stocks Rise from Three-Month Lows

European stock markets traded higher on Wednesday (Sept. 16), attempting to rebound after a sharp sell-off had pushed several regional indices to multi-month lows. Investors remained cautious about taking large positions ahead of the Federal Reserve's interest rate decision, a key focus for global markets.

The Stoxx Europe 600 index rose 0.5%, recovering from a three-month low hit during Tuesday's session. This rebound followed a period where European markets faced pressure from crude oil prices breaching the triple-digit mark, rising shipping risks in the Middle East, and high yields on risk-free assets.

Among major exchanges, Germany's DAX strengthened, the UK's FTSE 100 rose 0.4%, and France's CAC 40 gained 0.3%. Meanwhile, Spain's IBEX 35 and Italy's FTSE MIB each recorded a 0.6% increase.

Investor attention is now focused on the outcome of the Federal Open Market Committee's (FOMC) two-day meeting. Based on interest rate futures tracked by CME FedWatch, the market estimates a roughly 92% probability that the Fed will raise interest rates by 25 basis points—a sharp shift from the previous week, when the likelihood of a hike stood at around 50%.

This shift in expectations was driven by persistent US inflation and Brent crude prices remaining above US$113 per barrel following attacks on Saudi pipelines and shipping disruptions in the Red Sea. A quarter-point rate hike by the Fed would mark the first increase since mid-2023, following the European Central Bank's decision last week to raise its deposit facility rate to 2.50%.