PARIS (Reuters) – European stock markets ended higher on Thursday as investors welcomed the Federal Reserve’s latest monetary policy decision.
In Paris, the CAC 40 rose by 2.29% to 7,615.41 points, while the German Dax rose by 1.54% and the British Footsie strengthened by 0.91%.
The EuroStoxx 50 index ended the session up 2.16%, while the FTSEurofirst 300 gained 1.39% and the Stoxx 600 gained 1.36%.
The markets are welcoming the latest indicators published in the United States, the day after the Fed’s decision, which confirm the central bank’s reading of the economy.
The latter insisted on Wednesday on the strength of the American economy, and on the need to lower its rates to support this strength.
However, new jobless claims for the week ending September 14 were weaker than expected, while the Philly Fed sentiment indicator surprised on the upside, giving markets hope that the central bank is not as far behind on activity as its 50 basis point cut suggests.
“The Fed cut rates by 50 basis points, but stressed that the economy was doing well, and avoided a downward revision of its terminal rate anticipated by the markets,” notes Kit Juckes, chief Forex strategist at Société Générale CIB, who welcomes a “50bp cut that seemed restrictive.”
The markets are also digesting the latest decision by the Bank of England, which left its rates unchanged on Thursday.
“It is clear that the Bank’s relative caution contrasts with the Fed’s strong start to the easing cycle, which cut rates by 50 basis points yesterday. This policy divergence partly reflects the different mandates of the two central banks, but also the different outlooks for growth and inflation,” said Luke Bartholomew, deputy chief economist at abrdn.
The Bank of Japan’s meeting on Friday is also expected by investors, particularly if the institution, accustomed to surprising observers, adjusts its monetary policy.
A WALL STREET
Wall Street jumped in mid-session trading, with the S&P 500 hitting a record high after the Fed’s latest decision made a “soft landing” for the US economy more likely.
At the time of closing in Europe, trading on the New York Stock Exchange indicated a rise of 0.99% for the Dow Jones, against 1.6% for the Standard & Poor’s 500, and 2.75% for the Nasdaq Composite.
VALUES
Markets have priced in a soft landing for the U.S. economy, which would benefit global activity and growth stocks. The technology and basic resources sectors, which are more sensitive to activity, ended up 3.4% and 3.2%, respectively, the best performers on the Stoxx 600, while the utilities sector closed down 1.8%, the bottom of the index.
Campari rose 9.5% after its main shareholder announced it would buy up to 100 million euros of additional shares in the group.
The group’s performance supported other wine and spirits groups, with Pernod Ricard and Rémy Cointreau gaining 3.41% and 3.44% respectively.
Air France-KLM gained 3.4% after Exane BNP Paribas raised its recommendation on the group to “neutral”.
MFE-MediaForEurope, the commercial broadcaster controlled by the Berlusconi family, said on Thursday that its advertising sales are expected to beat forecasts for the first nine months of the year, rising 15.2%.
RATE
Short-term yields, which are more sensitive to monetary policy, are falling after the Fed’s latest decision.
At the time of the European closing, the yield on the ten-year Treasury rose 5.3 bp to 3.7396%, while the yield on the two-year note was unchanged at 3.6065%.
The yield on the German ten-year ended stable at 2.193%, while that of the two-year rate fell 4.8 bp to 2.216%.
CHANGES
The dollar is rising after good data released on Thursday, which raises hopes that the US economy remains strong. The pound is nevertheless rising against the greenback after the latest decision by the Bank of England.
The dollar gained 0.26% against a basket of benchmark currencies, the euro rose 0.2% to $1.114, and the pound strengthened 0.39% to $1.3264.
OIL
The Fed’s rate cut is supporting the barrel, with operators anticipating continued strong demand in the United States.
The dollar gained 0.19% against a basket of benchmark currencies, the euro rose 0.24% to $1.1145, and the pound strengthened 0.45% to $1.3272.
TO BE CONTINUED FRIDAY:
(Written by Corentin Chappron, edited by Sophie Louet)
Copyright © 2024 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
