Europe close: Stocks rise as Sweden and UK cut interest rates

7th Nov 2024 16:48

(Sharecast News) - European stocks finished firmly higher on Thursday as traders weighed up a barrage of economic data and central bank meetings from the UK, Sweden and Norway, with markets rebounding after a sharp US election-related slump.

The market reaction to Donald Trump's election victory from either side of the Atlantic couldn't have been more different: Wall Street indices surged to new record highs on Trump's pro-business stance, while European benchmarks dropped as investors mulled over how the president elect's proposed import tariffs might affect international trade.

After falling sharply on Wednesday, the Stoxx was up 0.6% at 509.92 by the close on Thursday, with a strong performance in Frankfurt (+1.7%) outweighing more moderate gains elsewhere and a slight fall in London.

"it was turnaround Thursday for the Dax, which shrugged off yesterday's tariff-related panic and the political developments in Germany to enjoy a healthy surge," said Chris Beauchamp, chief market analyst at IG.

Market sentiment in Frankfurt was being lifted by the news that German chancellor Olaf Scholz has fired his finance minister and called a confidence vote, paving the way for early elections.

Economic data came in thick and fast on Thursday, including figures that showed strong export growth in China, a big drop in German industrial production, better-than-expected eurozone retail sales and a softening of house-price growth in the UK.

Central banks in focus

Sweden's Riksbank on Thursday morning reduced its key policy rate by 50 basis points to 2.75% and said that further monetary easing could happen in December and into the first half of 2025. The central bank said that, to support economic activity, rates might need to be cut faster than anticipated at its latest meeting.

Meanwhile, Norway's Norges Bank announced that it was leaving rates on hold at a 16-year high of 4.5%, as expected.

The Bank of England lowered the cost of borrowing by 25bp to 4.75%, as expected, with the Monetary Policy Committee voting in favour of a cut by eight to one.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said "the waters ahead look murkier" for the UK. "Fresh nervousness has been sweeping bond markets amid fears that Trump's policies look set to increase inflationary pressures and swell the US deficit even further, with knock-on effects expected for the UK economy."

At 2000 CET, the Federal Open Market Committee will announce its policy decision, and is widely expected to cut the Federal Funds Rate by 25bp to 4.75%, with all eyes on comments from chair Jerome Powell.

Market movers

Italian bank Banco BPM was up 9% after saying it is moving to take full control of asset manager Amina Holding - in which it already owns 22% - in a €1.6bn deal.

London's FTSE 100 was being dragged lower after a collection of underwhelming results from heavyweights Auto Trader, BT Group, Sainsbury's and Rolls-Royce.

FTSE 250-listed engineering services group Wood Group was a standout mover of the day, with shares more than halving in value after the announcement of an independent review, which could result in prior-year restatements. Also on the second-tier index, ITV dropped 13% after the broadcaster saw an 8% drop in revenue for the first nine months of the year as its Studios arm was hit by the US actors' and writers' strike.

Danish hearing aids and audio equipment maker GN Store Nord saw shares rise after upgrading its guidance for free cash flow despite softer-than-expected organic revenue growth, with third-quarter earnings beating analysts' forecasts.