European shares rise as oil rally pauses; all eyes on Fed

European shares experienced a rebound on Wednesday, following two days of declines, as a pause in the rally of oil prices reignited risk appetite. Prior to the US Federal Reserve's monetary policy decision, the pan-European STOXX 600 index rose 0.4% to 636.81 points by 0705 GMT. Major stock exchanges, including Germany's DAX, also saw gains, with the index climbing by 0.4%.

Market expectations focused on the Fed's decision later that day, with the CME's FedWatch tool indicating a 93% probability of a 25-basis-point interest rate increase. The recent inflation surge, triggered by the Iran conflict, prompted investors to revise their rate forecasts. Rising oil prices, down 0.6% on Wednesday, alleviated some pressure, lifting stocks most affected, particularly banks.

Barclays and Standard Chartered were among the greatest gainers, rising by 1.4% and 1.7%, respectively. These stocks had contributed to the STOXX 600 reaching a three-month low on Tuesday. Notably, Babcock International maintained its annual forecast, with its shares increasing by 2.5%. Barratt Redrow lowered its home completions target for fiscal 2027 due to planning delays and fewer sales outlet openings, but its shares still rose 5.1%.