DAX and CAC gain as markets dismiss Fitch’s downgrade of France

European markets resilient amid Fitch's France downgrade

European equity markets started the new week mostly on the front foot ahead of key central bank interest rate meetings later this week.

The DAX 40 edged up 0.21% to 23,749, while the French stock market, the CAC 40, finished 0.92% higher at 7,897, brushing off Fitch’s downgrade of France’s sovereign credit rating from AA- to A+.

Behind the downgrade, Fitch cited:

• Political instability
• A high and rising debt ratio - projected to reach 121% of gross domestic product (GDP) by 2027
• Challenges in achieving fiscal consolidation amid government collapses and budget disputes.

The United Kingdom (UK) stock market, the FTSE 100, bucked the trend, finishing near the flat line as investors took a more cautious approach ahead of Wednesday night’s UK inflation update for August and Thursday night's Bank of England (BoE) meeting previewed below.

BoE interest rate decision

Date: Thursday, 18 September at 9.00pm AEST

At the Bank of England’s last meeting in August, the monetary policy committee (MPC) voted by a majority of 5–4 to lower the bank rate by 25 basis points (bp) to 4.00%. The BoE’s forward guidance was more hawkish than anticipated and emphasised data dependency going forward – a combination that tempered expectations for additional BoE rate cuts into year-end.

Since then, the annual rate of core inflation has edged up to 3.8%, the highest level since April, while at the same time, the unemployment rate has remained at 4.7%, its highest level since July 2021. Growth has been generally better than expected, rising by 1.2% year-on-year (YoY) in Q2 2025.

Markets are pricing in a 98% probability that the BoE will keep rates on hold at 4.00% this week on a 7-2 vote, with Taylor and Dhingra dissenting in favour of a 25 bp cut. The BoE’s next rate cut is not expected until March 2026.

BoE official bank rate chart

DAX 40 technical analysis

August ended with the DAX recording five consecutive lower closes into month-end. September has started with the same uninspiring undertone, with the DAX trading in a narrow range between 23,500ish and 24,000.

Looking ahead, should the DAX fall below a band of support at 23,500 – 23,380ish, it would open the way for a deeper decline initially towards support at 23,000, coming from the 19 June low. Not far below here is the 200-day moving average at 22,659, which will provide strong support if tested.

Conversely, if the DAX were to see a sustained break above recent range highs at 24,000 and then above the 24,550 – 24,650 resistance area, it would signal the correction is complete and the uptrend has resumed towards 25,000.

DAX 40 daily chart

FTSE 100 technical analysis

For August, the FTSE hit a fresh record high of 9357, which the FTSE retested last week before easing ahead of the weekend.

Despite this, it remains well positioned for another run higher, and if it were to see a sustained break above the 9357-record high, post Thursday's Federal Open Market Committee (FOMC) and BoE meetings, it would signal the uptrend has resumed with scope towards 9500.

Aware that while it remains below the 9357-record high, there is room for a dip back to 9100 as part of its recent consolidation. If support at 9100 were to break, it would open the way for a deeper decline towards the 8900-level coming from the highs of March and June.

FTSE 100 daily chart

• _{Source: TradingView. The figures stated are as of 16 September 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}