Business

European shares climb to new high amid mounting rate-cut talk

Investors now see ECB as almost certain to cut rates in June

The Swiss National Bank under Thomas Jordan unexpectedly cut interest rates on Thursday. Photograph: Michael Buholzer/Keystone via AP

Joe Brennan
Thu Mar 21 2024 - 18:15

European shares climbed to record-high levels on Thursday as a move by the Swiss central bank to cut rates and comments from the Bank of England that it was heading in the same direction fuelled optimism among investors.

Investors also tweaked their views about the European Central Bank’s (ECB) policy path, pricing in a 90 per cent chance of an ECB rate cut by June from less than an 80 per cent chance late on Wednesday.

The pan-European Stoxx 600 index ended up 0.9 per cent at a record closing high and also hit an all-time intraday peak of 510.25 points earlier in the day.

Dublin

The Iseq All Share index gained 0.4 per cent higher to 9,902.68. AIB jumped 5.1 per cent to €4.59 and Bank of Ireland advanced 3.5 per cent to €9.21.

READ MORE

While the banks’ earnings have surged since the European Central Bank (ECB) started to hike rates in July 2022 as it drove net interest income, investors have chosen to now focus on the likelihood of a reduction in borrowing costs boosting the economy.

The prospects of the Government continue to close to the end of its natural lifespan to next March, following Taoiseach Leo Varadkar’s decision on Wednesday to step down, has also eased concerns in the sector about potential banking policy change.

Housebuilders were also in demand, with Cairn Homes advancing 1.9 per cent to €1.64 and Glenveagh Properties edging 1.4 per cent higher to €1.27.

London

UK stocks closed higher, with the FTSE 100 rising as much as 2 per cent, boosted by rate-sensitive financials after the Bank of England kept borrowing costs unchanged and said that the economy is moving in the direction of interest rate cuts.

The FTSE 100 closed at its highest level since May 2023, boosted by a 4.5 per cent gain in the investment banking sector, while a near 1 per cent fall in the pound against the dollar also helped the exporter-heavy index.

Investor euphoria gained steam after the Bank of England held rates at 5.25 per cent and said it expected inflation to drop below its 2 per cent target in the second quarter.

Next surged 6.7 per cent to a record high after the clothing retailer reported a better-than-expected rise in profit for 2023-24.

Tritax Big Box jumped 2.7 per cent after the boards of the warehouse owner and UK Commercial Property said they had agreed on a £924 million (€1.08 billion).

Still, Dowlais Group slid close to 10 per cent after the GKN Automotive owner forecast current-year revenue to be similar to 2023 levels.

Europe

Technology stocks led the charge across Europe with a jump of 3.2 per cent as investors gravitated towards risky assets after the US Federal Reserve stuck to its view of three interest rate cuts this year.

Also boosting the index were gains in European semiconductor stocks including heavyweight ASML Holding after US chipmaker Micron’s strong third-quarter revenue forecast

The basic resources index, which houses mining stocks, added 2.6 per cent, as prices of most metals climbed, with gold prices hitting an all-time high earlier in the session.

On the data front, French business activity shrank for a tenth consecutive month in March, while Germany’s economic downturn eased slightly.

New York

Wall Street’s main stock indexes ALSO touched record highs by lunchtime trading as chip stocks rallied following Micron Technology’s upbeat forecast. Peers such as Intel and Nvidia also advanced.

US stock indexes had closed higher on Wednesday after US central bankers kept borrowing costs unchanged and indicated they still expect to ease interest rates by three-quarters of a percentage point by the end of 2024.

“This market is hungry and is salivating for information that’s going to continue to drive its rally and those two primary areas from my view are the Fed and potential rate cuts, and AI,” said Andre Bakhos, president at Ingenium Analytics.

Apple, however, bucked the trend and fell back after the US Department of Justice sued the iPhone maker, the first major antitrust effort against the company by the Biden administration, alleging it monopolised smartphone markets. – Additional reporting, Reuters

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

LATEST STORIES