(Reuters) – Major European stock markets fell in early trading on Monday as investors opted for caution ahead of the U.S. Federal Reserve’s expected rate cut this week.

In Paris, the CAC 40 lost 0.17% to 7,452.46 points at around 07:23 GMT. In Frankfurt, the Dax fell by 0.26% and in London, the FTSE 100 lost 0.06%.

The EuroStoxx 50 index is down 0.10%, as is the FTSEurofirst 300, while the Stoxx 600 is down 0.11%.

Investors remain divided over the size of the US Federal Reserve’s interest rate cut expected this week, with the proportion betting on a 50 basis point cut rising sharply, although a 25 basis point cut is still seen as the most likely outcome.

“We continue to believe that a 25bp cut is the most likely and most reasonable given the information we have (…) A more aggressive move could be seen as a much more negative diagnosis by the Fed on the economic outlook, which could affect confidence,” LBP AM underlines in a note published on Monday.

The Fed’s rate cut on Thursday will be the first since the campaign to raise borrowing costs began in 2022, while in the eurozone, the European Central Bank (ECB) last week enacted its second rate cut.

Caution is also warranted after data released over the weekend showed that Chinese industrial output growth slowed to its weakest pace in five months in August, while retail sales and new home prices continued to fall in the world’s second-largest economy.

In terms of values, electrical equipment distributor Rexel gained more than 8% and posted the best performance in the SBF 120 after rejecting an offer of 8.46 billion euros from QXO.

Icade (+4.7%) and Ipsen (+3.9%) are both up after recommendation upgrades.

(Written by Diana Mandiá, edited by Blandine Hénault)

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