Post-Fed Volatility: AI Sector Under Scrutiny Following Oracle's Outlook

European equities experienced marginal movement on Thursday as investors processed the latest interest rate reduction and accompanying statement from the U.S. Federal Reserve, all while navigating ongoing apprehension surrounding the influential artificial intelligence sector. Specifically, by 03:05 ET (08:05 GMT), the German DAX index saw a decrease of 0.3%, the U.K.'s FTSE 100 declined by 0.1%, and the French CAC 40 registered a slight increase of 0.1%.

The U.S. central bank implemented a widely anticipated 25-basis-point cut, adjusting the federal funds rate target range to 3.5% to 3.75% on Wednesday. However, the accompanying commentary indicated a likely pause in further easing, as officials await clearer evidence regarding the trajectories of employment and inflation. Chair Jerome Powell noted in the subsequent press conference that this year's three rate reductions have placed the rate within a "range of plausible estimates of the neutral rate," positioning the bank appropriately to determine future adjustments based on forthcoming economic indicators. The decision faced notable internal disagreement, with three policymakers dissenting: two favored maintaining current rates, while one advocated for a fifty-basis-point reduction.

Analysts at Vital Knowledge suggested that the twin drivers bolstering the market in 2025, namely, global monetary easing and a unified AI momentum trade—will likely dissipate in 2026, creating a less predictable environment for stocks. The uncertainty surrounding the AI trade was underscored by the post-market results from Oracle. The U.S. cloud computing firm released a profit and revenue forecast that fell short of market estimates and, critically, announced a $15 billion increase in anticipated spending. This signals that substantial capital investments aimed at securing AI cloud-computing clientele are not yielding expected profitability as quickly as anticipated.

In the European corporate landscape, earnings news was sparse, though Munich Re projected insurance revenue of €64 billion for 2026, exceeding the consensus forecast of €62 billion, indicating a stronger expected top-line performance. This guidance was presented alongside a new strategic plan extending through 2030, marking a deviation from the reinsurer's previous three-year planning cycle.

The European economic calendar offered limited significant data releases on Thursday. Attention, however, was directed toward the Swiss National Bank's policy meeting later in the session. Despite recent inflation and GDP growth figures being weaker than anticipated, the SNB is broadly expected to maintain its interest rate at 0.0%. Nomura analysts noted that the threshold for implementing a negative policy rate remains high, suggesting that the central bank may keep rates unchanged for an extended period.

Oil prices edged down on Thursday, partially surrendering the previous session's gains, which followed the U.S. seizure of a sanctioned oil tanker off the coast of Venezuela. This action had amplified concerns over potential supply disruptions. Brent futures decreased by 0.7% to trade at $61.78 per barrel, while U.S. West Texas Intermediate crude futures also fell by 0.7% to $58.05 per barrel. The initial rally on Wednesday, triggered by the tanker's seizure, had introduced a supply-risk premium by highlighting the potential for interruptions to Venezuelan oil exports. Investors also continue to monitor developments in Ukraine peace negotiations and the Federal Reserve's rate decision, given that lower interest rates can reduce borrowing costs, stimulate economic growth, and consequently boost oil demand.