European stock markets began the week on a positive note. The Eurostoxx, France’s CAC 40, and Spain’s IBEX all rose by 0.4%, while Germany’s DAX climbed by 0.3%. Italy’s FTSE MIB led the gains with a 0.6% increase, but the UK’s FTSE dipped slightly by 0.1%. There’s hope that regional stocks will continue the upward trend seen last week after a slow start in September. In the US, futures also showed a small gain of 0.1% at the beginning of the session. The course of the week will rely on the Federal Reserve’s upcoming decisions.

Market Trends And Future Outlook

Europe’s markets have kicked off the week positively, with most indices like the DAX and CAC 40 showing small gains. This is encouraging after the slow September. However, the minor rise in US futures indicates uncertainty. The key factor for the next few weeks will be the Federal Reserve’s decision. Currently, the market expects that the Fed may pause rate hikes since recent data shows US CPI inflation dipped to 2.8% in August 2025, much lower than previous highs. However, GDP growth for Q2 2025 was also revised down to just 1.1%, raising concerns about a slowdown. This leaves the Fed in a tricky spot. Traders are feeling this stress, with the VIX volatility index rising to 19 from its summer lows. Given this uncertainty, it’s wise to prepare for significant price changes instead of predicting a specific direction. This could involve buying options to protect existing portfolios, such as purchasing puts on major indices like the S&P 500. We may also see an increase in straddle positions, where traders buy both call and put options to benefit from large price movements in either direction after the Fed’s announcement.

Market Sensitivity To Federal Decisions

This situation is reminiscent of late 2023, when the market closely followed the Fed for any hints of a policy change. Even minor shifts in tone back then caused big market movements. We anticipate similar sensitivity this week, meaning any unexpected move from the Fed—whether more aggressive or more lenient—could lead to significant pricing changes across various asset classes. Create your live VT Markets account and start trading now.

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