Europe midday: Stocks rise on rate-cut hopes, Frankfurt jumps

7th Nov 2024 10:47

(Sharecast News) - European stocks rebounded on Thursday following a post-US election slump, with market sentiment lifted by monetary easing from across the continent.

Meanwhile, there was a barrage of economic data to contend with during the morning session, including strong export growth in China, better-than-expected eurozone retail sales and a softening of house-price growth in the UK.

The Stoxx 600 was up 0.6% at 509.86 by 1226 CET, with a strong performance from Germany's DAX (+1.3%) met with more moderate gains elsewhere.

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.

"With the chancellor pushing back against their coalition partners insistence that spending should be limited in the face of rampant military outgoings, there is a hope that this move would see the government push forward with measures that will also prioritise getting the economy back on its feet," said Joshua Mahony, chief market analyst at Scope Markets.

Stocks fell sharply on Wednesday in the aftermath of the US presidential election, in which former president Donald Trump beat vice president Kamala Harris with a comfortable majority of the votes.

While Wall Street indices surged overnight - the Nasdaq, S&P 500 and Dow all hit record highs with the latter jumping more than 3% - the market reaction this side of the Atlantic was one of trepidation, as investors mulled over how Trump's proposed import tariffs might affect international trade.

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.

Next up is the Bank of England, which at 1300 CET is also expected to cut rates - this time by 25bp to 4.75%, with two more cuts priced into markets for next year already.

Higher government spending proposed in last week's Autumn Budget has complicated matters for the UK economy somewhat. "And now, the bank analysts are lowering their post-Trump growth expectations for the UK - which is, in return, dovish for the BoE bets," said Swissquote Bank's Ipek Ozkardeskaya.

Finally, at 2000 CET, the Federal Open Market Committee will announced 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

Danish hearing aids and audio equipment maker GN Store Nord saw shares jump 8% after upgrading its guidance for free cash flow despite softer-than-expected organic revenue growth, with third-quarter earnings beating analysts' forecasts.

Italian bank Banco BPM was up 10% 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 underperforming the rest of the continent, trading more or less flat by midday, as results from ITV, Auto Trader, BT Group, Sainsbury's and Rolls-Royce all underwhelmed.