Europe close: Stoxx 600, Footsie and DAX all hit new record highs

9th May 2024 16:01

(Sharecast News) - Europe's Stoxx 600 index rose to another record high on Thursday after dovish comments from the Bank of England raised hopes that monetary policy across the continent may continue to ease in the coming months.

The Stoxx 600 finished the day 0.2% higher at a new closing record of 516.77, helped by fresh records on the FTSE 100 and Dax.

Most major indices across the continent were in positive territory with the exception of Spain's Ibex 35, which dropped 0.9% on the back of a heavy fall from the country's second-largest bank BBVA.

The Bank of England stood pat on interest rates at 5.25%, as widely expected, but suggested cuts could be on their way. This was the sixth meeting in a row the Bank has held rates, even as the latest ONS figures showed that consumer price inflation eased to 3.2% in March from 3.4% in February.

BoE governor Andrew Bailey said: "We've had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months. We need to see more evidence that inflation will stay low before we can cut interest rates. I'm optimistic that things are moving in the right direction."

Paul Dales, chief UK economist at Capital Economics, said the Bank "gave the impression it's getting closer to cutting rates", while EY Item Club's chief economist Peter Arnold labelled Bailey's words as "unmistakably dovish".

The comments came one day after Sweden's Riksbank cut interest rates for the first time since 2016, following similar moves by central banks in Switzerland, Czech Republic and Hungary over the past month.

European markets were also bolstered by a strong start on Wall Street after data showed that US jobless claims jumped to a nine-month high of 231,000, well ahead of expectations. "If the higher level of claims persists or if claims rise further, it would be a sign of a further loosening in labour market conditions," said Nancy Vanden Houten, lead US economist at Oxford Economics.

Market movers

London's heavyweight mining sector was performing well after data from China's customs agency showed that exports rose 1.5% in April, while imports surged 8.4%, ahead of the 1.0% and 5.4% increases expected by the market, respectively. Anglo American, Antofagasta and Glencore were all trading higher.

UK markets were also given a boost by consumer-facing stocks like JD Sports, Frasers, Sainsbury's and Whitbread, along with housing platform Rightmove, following the dovish comments from the BoE.

"Whilst rate cuts won't make an immediate difference to many household budgets, it will make people feel more confident about the state of their finances. If they've got fixed rates coming to end in the next year, remortgaging costs are likely to be cheaper and buyers who had been putting off a move might now jump off the fence," said Danni Hewson, AJ Bell head of financial analysis.

Weapons maker oil and gas explorer Harbour Energy surged 8% as the company hiked its full-year dividend and said its takeover of German rival Wintershall was "on track" to complete in Q4.

Spanish bank Sabadell jumped 3% after rival BBVA presented a €12.23bn takeover bid directly to shareholders, even though the former's board already rejected the proposal. BBVA shares were down 6%.