European Markets Face Downturn as December Trading Begins Amid Global Uncertainty

European stock markets are starting December on a cautious note, with major indices expected to open lower. The U.K.’s FTSE is projected to fall by 0.26%, Germany’s DAX by 0.62%, France’s CAC 40 by 0.46%, and Italy’s FTSE MIB by 0.5%, according to IG data. The downturn follows a mixed end to November, as investors grappled with volatile stock movements and mounting concerns over high AI company valuations.

Investor sentiment in Europe is also shaped by global monetary policy expectations. Markets are closely watching the U.S. Federal Reserve, which is widely expected to reduce interest rates during its December 9-10 meeting. Traders currently price in an 87.4% probability of a quarter-point rate cut, signaling optimism for potential market relief as 2025 comes to a close.

Geopolitical developments are adding another layer of uncertainty. This week, U.S. Special Envoy Steve Witkoff is scheduled to meet Russian President Vladimir Putin in Moscow to discuss a peace plan for Ukraine. The discussions follow Ukraine’s tentative approval of a U.S.-backed 19-point peace framework, revised from an earlier 28-point plan that appeared to favor Russia. U.S. Secretary of State Marco Rubio described weekend talks in Florida as “very productive” but noted that more work remains to reach a final agreement.

Across the Asia-Pacific region, markets opened December in mixed territory as traders digested China’s latest manufacturing data, which revealed an unexpected contraction in factory activity in November. Meanwhile, U.S. futures showed little change after a strong week, with Wall Street historically seeing December as one of its best months. According to the Stock Trader’s Almanac, the S&P 500 typically rises more than 1% during December, making it the third-best performing month of the year since 1950.

With no major earnings or economic releases scheduled in Europe on Monday, traders are expected to focus on global cues, including U.S. interest rate policy and developments in Ukraine. As the final month of the year unfolds, investors are navigating a complex mix of geopolitical tension, monetary expectations, and seasonal optimism, setting the tone for the closing weeks of 2025.

source: cnbc