European equities stage best rally in a month ahead of Fed rate decision

European equities surged on Wednesday, marking their largest single-day gain in over a month as traders waited for the Federal Reserve's interest rate decision. The pan-European STOXX 600 index jumped 0.6%, after falling to a three-month low the previous day. Germany's DAX rose 0.3%, while France's CAC 40 and London's FTSE 100 each gained 0.6%, and Italy's FTSE MIB increased 0.9%.

Soitec, a company affected by AI slowdown concerns, jumped over 11% after JPMorgan upgraded its stock rating to 'overweight.' The probability of a 25-basis-point rate increase from the U.S. Federal Reserve stands at around 92%, down from a week ago when odds were more uncertain. The Federal Reserve's first rate hike in over a year is expected, following the European Central Bank's recent rate hike.

Inflation is likely to remain high, according to Deutsche Bank analysts. The key question now is how Federal Reserve Chair Kevin Warsh will frame the tightening cycle in his post-meeting press conference.