The EU is cutting interest rates and easing regulations to revive growth, but inflation risks, US policy divergence, and trade tensions could disrupt the plan. Here’s what’s at stake.

European stocks are expected to open in mixed territory Wednesday as global market jitters over AI tech rivalry between the U.S. and China eases.

The European Central Bank is cutting its key interest rate, a step to boost an economy that’s struggling to grow as consumers burned by inflation warily eye price tags and businesses try to chart a course amid political turmoil in leading economies France and Germany.

The European Central Bank cut rates on Thursday, the Bank of Canada on Wednesday, and the Bank of England is likely to do so next week.

US gross domestic product grew by 2.8% in 2024, compared with just 0.7% in the Eurozone. Plagued by structural weaknesses and high energy costs, Europe is being led by the US in terms of growth, competitiveness and innovation.

The Fed will likely be on a more hawkish path, so significant divergence from the ECB could risk flight of capital towards the Dollar.”

Shares of ASML jumped 10.6% after the Dutch company reported better-than-expected fourth-quarter bookings of 7.088 billion euros ($7.39 billion). Its peers ASM International, BE Semiconductor and Infineon gained between 2.7% and 7.5%. Technology was the top winning sector, soaring 4.5%.

Rising global borrowing costs show that investors “are already pricing in” the economic impact of Trump’s policies.

Josh Lipsky, who runs international affairs think-tank the Atlantic Council's global CBDC tracker, says that though Trump's ban will have little impact domestically given the Federal Reserve has never shown real appetite for a "retail" digital dollar, it is still a blow.

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European Central Bank President Christine Lagarde slapped down on Thursday a suggestion by her Czech colleague Ales Michl to include bitcoin among his country's official reserves.