European shares advance as Fed delivers jumbo rate cut; BoE in focus
By Shubham Batra
(Reuters) -European stocks jumped on Thursday after the U.S. Federal Reserve delivered a 50-basis-point rate cut and flagged that further easing would be measured, raising hopes of a soft landing for the American economy.
The continent-wide STOXX 600 index was up 0.7% at 518.24 points, hitting its highest levels in more than two weeks.
Miners led the gains among sectors, with a 3% jump and were set to log their best day this year, after prices of most base metals rose with the long-awaited Fed rate cut and with bets of more stimulus in top metals consumer China. [MET/L]
Shares of rate-sensitive real estate, technology firms and banks climbed between 0.5% and 1.3%, while telecom and utilities fell 0.7% each.
The U.S. central bank kicked off its monetary-easing cycle on Wednesday with a jumbo reduction that brought the benchmark policy rate to 4.75%-5.00% range.
Fed Chair Jerome Powell said this was meant to show policymakers’ commitment to sustaining a low unemployment rate now that inflation has eased.
“The U.S. may have experienced whipsaw price action on the back of yesterday’s Fed rate cut, but there has been a straightforward welcome to the Fed’s dovish leap into its rate cutting cycle in Asia and Europe,” said Kathleen Brooks, research director at XTB.
“Even though the Fed was more dovish than expected and downwardly revised their expectations for interest rates, the market was still ahead of the Fed, and was pricing in more interest rate cuts, particularly for this year.”
Money markets see total easing of 72 basis points from the Fed in 2024 after the 50 bps cut, indicating minimum rate cut of 25 bps each in next two meetings, according to CME’s FedWatch Tool.
Investors will now watch out for Bank of England’s rate decision at 1100 GMT, with Britain’s benchmark FTSE 100 up 0.7% ahead of the verdict.
Among stocks, Next climbed 2.6% as the British clothing retailer appeared poised to make an annual profit of almost 1 billion pounds ($1.3 billion) after it raised its outlook for the second time in two months.
British online grocer Ocado (LON:OCDO) Group soared 10% after Ocado Retail lifted its forecast for 2023-2024 following a 15.5% jump in its revenue.
Poland’s Allegro fell 6% after the e-commerce platform forecast its earnings growth to slow down at home in the third quarter to 11-13%.
Shares of IG Group slipped 3.6% as the company was trading without entitlement to its latest dividend payout.