European stocks traded cautiously on Tuesday, struggling to gain momentum as investors awaited key monetary policy decisions during the final month of the year.
At 11:05 AM Saudi time, the DAX index in Germany rose by 0.1% and the FTSE 100 index in the United Kingdom rose by 0.1%, while the CAC 40 index in France fell by 0.1%.
Global monetary policy in the spotlight
European stocks fell on Monday, in a gloomy start to December, but are still on track for solid annual gains, supported by growing expectations that the U.S. Federal Reserve will cut interest rates next week.
Both Germany’s DAX and the UK’s FTSE 100 are on track to achieve gains of more than 18% in 2025, while France’s CAC 40 lags behind with gains of no more than 10% as it has been affected by political uncertainty.
Traders estimate the probability of a Fed rate cut of a quarter point at 87.2%, according to the CME FedWatch tool, while the Bank of England is widely expected to cut interest rates this month given signs of easing inflation and tepid growth, especially after the detailed tax increases in last week's autumn budget.
Staying in Europe, preliminary inflation data for the Eurozone, due later in the session, are expected to show that annual inflation is slightly above the ECB's medium-term target, although this is unlikely to change interest rate expectations much as markets expect the European Central Bank to keep interest rates unchanged until 2026.
European share buybacks will boost momentum in 2026
Apart from assistance from central bank policies, analysts at Barclays also see the potential for strong momentum next year in the European corporate sector.
European companies repurchased shares worth 19.3 billion euros in November 2025, a level close to the peak since 2017, according to Barclays in a note dated Tuesday.
Share buybacks accounted for 2.3% of European equity trading volume during the month, with energy and financial firms generating over 2.5% of the volume through buybacks alone. Execution in the fourth quarter exceeded historical averages, analysts noted.
The crucial factor supporting continued strength is unexploited capacity. Around 70% of the 2026 buyback programs remain in place, while Barclays' probability model anticipates new announcements of approximately €50 billion during the first quarter.
Barclays expects 8% growth in earnings per share for European stocks in 2026. Car manufacturers, telecom operators and energy companies currently offer the highest free cash flow returns among sectors.
Slight increase in oil prices
Oil prices maintained a positive tone on Tuesday, as hopes for peace in Ukraine remained fragile, tensions between the United States and Venezuela escalated, and a group of major producers increased production levels.
Brent crude futures rose 0.1% to $63.20 a barrel, and U.S. West Texas Intermediate crude futures rose 0.2% to $59.41 a barrel.
Both benchmark indexes advanced more than 1% on Monday, with the West Texas Intermediate crude contract nearing its highest level in two weeks.
Ukrainian President Volodymyr Zelensky said on Monday that Kyiv's priorities are to preserve sovereignty and ensure strong security guarantees, adding that territorial disputes remain the most complicated point.
US envoy Steve Wittkopf is scheduled to brief Russian authorities on Tuesday, but the nearly four-year-old conflict is unlikely to end immediately.
Tensions between Washington and Caracas have also escalated after US officials indicated they may tighten restrictions on Venezuela, which is seen as having the world's largest oil reserves, including closing its airspace.
On Sunday, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, confirmed a small increase in oil production for December but also confirmed a halt to increases in the first quarter of next year due to growing concerns about a supply glut.
