US Fed rate cut sparks optimism in European markets, but export risks loom: analyst

The U.S. Federal Reserve's first interest rate cut in nearly a year is poised to ripple across the European economy, fueling short-term market gains while intensifying export headwinds, according to European policy analyst Philipp Lausberg.

The U.S. Federal Reserve (Fed) on Wednesday decided to lower the target range for the federal funds interest rate by 25 basis points to 4 to 4.25 percent, the first rate cut since December 2024, according to a statement by the Federal Open Market Committee (FOMC), the principle monetary policymaking body of the Federal Reserve system, after a policy meeting.

Lausberg, a senior policy analyst in the European Political Economy Programme at the European Policy Center (EPC), believes the Fed's interest rate cut will bolster European stock market performance in the coming months, as global liquidity improves and investor sentiment strengthens.

"That is historically proven we've seen that whenever the Federal Reserve cuts rates, European markets tend to perform quite well in the next three to six months or so. And this is because, first of all, we have more liquidity that can be invested. And at the same time, yield for U.S. assets tends to go down, so for investors who're seeking higher profits, it makes sense to branch out to other markets, including of course the European market," said Lausberg.

The Fed's interest rate cut will push up the euro's exchange rate against the U.S. dollar, enhancing the attractiveness of euro-dominated assets and attract more investment. Additionally, it will reduce import costs of commodities such as energy and raw materials priced in dollars, easing inflationary pressure in the European Union (EU), according to Lauberg.

He also highlighted that the appreciation of the euro will weaken the price advantage of EU export products, increasing pressure on EU exports and adding uncertainties to the already fragile economic recovery in the EU.

"European exports will become more expensive, and that can have a negative impact on European export-oriented industries, because it will be harder for them to compete with other goods that become cheaper, especially U.S. goods. So, that can have a negative effect on growth," said Lausberg.

Affected by the U.S. tariffs, the eurozone's economy recorded a quarterly growth of 0.1 percent in the second quarter of this year, marking the lowest quarterly growth since the beginning of 2024. Major European economies, such as Germany and Italy, suffered setbacks in exports during the second quarter, which lowered the overall economic growth rate of the eurozone.

The European Central Bank (ECB) announced on Sept. 11 to keep all three benchmark rates unchanged, marking the first time it has stayed on hold since the rate-cutting cycle began last June.

"Unlike the U.S., it [the ECB] does not have any other mandate. The U.S. Fed has the mandate to create jobs, for example. ECB doesn't have that. So, it's really about keeping inflation low. As long as we don't see this to stabilize for a longer period of time, I don't think that the ECB will cut rates," said Lausberg.

US Fed rate cut sparks optimism in European markets, but export risks loom: analyst

US Fed rate cut sparks optimism in European markets, but export risks loom: analyst

US Fed rate cut sparks optimism in European markets, but export risks loom: analyst

US Fed rate cut sparks optimism in European markets, but export risks loom: analyst

The "soft landing" of the China-EU electric vehicle case will greatly boost market confidence and inject new momentum into China-EU cooperation in automobile trade and investment, a spokeswoman of the Ministry of Commerce (MOC) said at a press briefing in Beijing on Thursday.

He Yongqian, the spokeswoman, made the remarks after China and the European Union (EU) agreed on the necessity of providing general guidance on price undertakings for Chinese companies exporting battery electric vehicle (BEV) passenger cars to the EU.

"China and the EU simultaneously announced on Monday that they had achieved positive outcomes following multiple rounds of consultations on the EV case, a development that has drawn wide attention at home and abroad. Industry players from both sides have 'highly welcomed and fully endorsed' the outcome, saying the 'soft landing' of the case is expected to greatly boost market confidence and inject new momentum into China-EU cooperation in automobile trade and investment. Some EU politicians have described it as a positive step toward building a sustainable China-EU trade relationship, and said it demonstrated that resolving trade differences through partnership remains feasible," she said.

"Against the current international backdrop, China and the EU, acting in a spirit of mutual respect and within the framework of WTO rules, have properly addressed the EV case, which is of significant positive importance. The outcome will not only contribute to the sound development of China-EU economic and trade ties and help safeguard the stability of the global automotive industrial and supply chains, but will also send a clear and strong signal that both sides are willing to uphold a rules-based international trading order, setting a good example for countries to resolve differences through dialogue and consultation and injecting greater certainty and positive energy into global economic growth," she said.

"China appreciates the spirit of dialogue showed by the EU side and stands ready to work with the EU, building on the current positive outcomes, to further implement the consensus reached by the leaders of the two sides, maintain dialogue and communication, and support stable industrial and supply chains on both sides, continue to deepen cooperation on the basis of market principles, and make active contributions to the global green transition," she added.

"Soft landing" of China-EU EV case to significantly boost market confidence: MOC spokeswoman

"Soft landing" of China-EU EV case to significantly boost market confidence: MOC spokeswoman