Europe Ends in the Red as Fed Rate Hike Bets Cool Off – Market Wrap (September 26, 2025)

Why Did European Markets Slide Today?

European equities extended losses for a third straight session, with the DAX and CAC 40 both down over 1%. The sell-off mirrored overnight weakness in Asia, where China’s property sector woes resurfaced. "It’s a classic risk-off move," noted BTCC analyst James Chen. "Traders are locking in profits before quarter-end, especially in overbought sectors like AI chips."

Fed Rate Speculations: What Changed?

CME FedWatch Tool data shows just a 34% chance of a September cut—down from 68% last week. The shift came after Fed Governor Michelle Bowman’s hawkish remarks: "We’re not even close to declaring victory on inflation." Bond markets reacted swiftly, with 10-year Treasury yields jumping 12 basis points to 4.3%.

How Are Currency Markets Responding?

The euro (EUR/USD) slipped to 1.0720, its lowest since July, as ECB-Fed policy divergence widened. "The dollar’s strength is squeezing European exporters," said TradingView’s Clara Mendez. Notable movers:

• Swiss franc (CHF): Gained 0.4% as a safe-haven play
• Bitcoin: Held steady at $62,000 despite the risk-off mood

Sector Breakdown: Who Took the Biggest Hit?

Bank stocks cratered 2.3% on margin concerns, while luxury goods fell 1.8% amid China demand fears. Surprisingly, energy outperformed (+0.2%) as Brent crude rebounded to $85/barrel after Middle East tensions flared.

Historical Context: How Unusual Is This Pullback?

Since 2000, September has been the worst month for European stocks (avg. -1.2%). But this year’s drop looks orderly compared to 2022’s energy crisis sell-off. "We’re seeing profit-taking, not panic," observed Bloomberg’s Markus Wong.

What’s Next for Investors?

All eyes turn to Friday’s US PCE data—the Fed’s preferred inflation gauge. A hot print could cement "higher for longer" rates. Pro tip: Watch the German IFO survey tomorrow for early clues on Q4 GDP.

This article does not constitute investment advice. Past performance isn’t indicative of future results.

FAQ: Your Market Questions Answered

Why are Fed rate expectations shifting?

Recent comments from Fed officials and sticky services inflation have markets pricing in fewer cuts. The August jobs report also showed unexpected wage growth.

Should I sell European stocks now?

Not necessarily. Many analysts see this as a healthy correction. The Stoxx 600 still trades at just 12x forward earnings—a discount to US markets.

How does this affect crypto markets?

Bitcoin’s correlation with tech stocks has weakened in 2025. The BTCC exchange reported steady ETH futures volume despite the equity sell-off.