ECB rate cut boosts Europeans stocks, euro / Photo: © AFP
ECB rate cut boosts Europeans stocks, euro
Europe's main stock markets and the euro climbed Thursday as the European Central Bank cut interest rates for the second time this year.
Wall Street shares, however, were down in early deals as investors reacted to data showing an acceleration in wholesale inflation in August.
While the US Federal Reserve is expected to finally cut its own borrowing costs next week, the ECB reduced its key rate by a quarter percentage point again, as expected.
It was the same size as its previous cut in June, which marked the end of a record hiking cycle that began in mid-2022 to a tame a surge in consumer prices.
The euro rose against the dollar following the decision.
Frankfurt and Paris stocks gave up some of their gains following the ECB announcement which gave no indication on future rate cuts and was accompanied by a slight reduction in its growth forecasts.
"With wage growth far outpacing productivity and service inflation picking up again, the (ECB) governing council has no reason to accelerate the pace of cutting rates or committing to further rate cuts at this stage," said Sylvain Broyer, S&P Global Ratings's chief economist for Europe, the Middle East and Africa.
A US consumer inflation reading Wednesday allowed investors to breathe a sigh of relief after a tough couple of weeks that have been filled with worries about the world's top economy, as a weak run of jobs figures stoked recession fears.
But Wall Street's three main indexes fell on Thursday after figures showed wholesale inflation rose 0.2 percent on a month-on-month basis in August after reaching zero percent in July.
The Fed is yet to cut borrowing costs after central banks around the world hiked aggressively when inflation soared as nations emerged from Covid lockdowns and following Russia's invasion of Ukraine.
The rise in wholesale inflation will fuel a debate about the size of next week's cut.
Bets have surged on a 25-basis-point reduction rather than a bigger 50-basis-point cut after Wednesday's data showed core inflation had seen an unexpected uptick.
US stocks had rallied on Wednesday, with a big jump in the tech sector led by chip titan Nvidia rocketing more than eight percent.
And the positive mood flowed through to Asia on Thursday, where Tokyo led gainers and jumped more than three percent after seven days of losses.
- Key figures around 1400 GMT -
New York - Dow: DOWN 0.3 percent at 40,852.95 points
New York - S&P 500: DOWN 0.2 at 5,543.82
New York - Nasdaq Composite: DOWN less than 0.1 percent at 17,381.54
London - FTSE 100: UP 0.4 percent at 8,225.07
Paris - CAC 40: UP 0.1 percent at 7,404.41
Frankfurt - DAX: UP 0.5 percent at 18,423.25
Tokyo - Nikkei 225: UP 3.4 percent at 36,833.27 (close)
Hong Kong - Hang Seng Index: UP 0.8 percent at 17,240.39 (close)
Shanghai - Composite: DOWN 0.2 percent at 2,717.12 (close)
Euro/dollar: UP at $1.1039 from $1.1018 on Wednesday
Pound/dollar: UP at $1.3058 from $1.3046
Euro/pound: UP at 84.54 pence from 84.43 pence
Dollar/yen: DOWN at 142.03 yen from 142.38 yen
Brent North Sea Crude: UP 1.2 percent at $71.46 per barrel
West Texas Intermediate: UP 1.4 percent at $68.24 per barrel
burs-rl/lth
(V.Sørensen--DTZ)
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