Europe open: Stocks rally after US gains; ECB announcement eyed

12th Sep 2024 07:35

(Sharecast News) - European stocks rose sharply in early trade on Thursday, taking their cue from a solid session on Wall Street, as investors eyed an expected rate cut by the European Central Bank.

At 0900 BST, the benchmark Stoxx 600 index was up 1.2%, Germany's DAX was 1.3% higher and France's CAC 40 was 1% firmer.

Overnight in the US, stocks rallied as the latest inflation reading showed a higher-than-expected increase in core inflation, raising expectations for a 25 basis point rate cut from the Federal Reserve at next week's policy meeting.

Patrick Munnelly at Tickmill Group said: "The European Central Bank policy decision is the primary risk event of the day in the European session. A quarter-point reduction is already entirely anticipated; however, it is unclear whether the central bank will implement additional reductions in October and December.

"The market is currently pricing a move next month at approximately 40%, indicating that inflation-wary conservatives remain in the majority. The most probable outcome is that ECB President Christine Lagarde will adhere to the most recent narrative, which states that decisions are made on the basis of incoming data at each meeting, in her post-meeting briefing. In this context, it is probable that the movement of the US curve will continue to dominate cross-market spreads between euro area and US rate expectations.

"Subsequently, the focus will return to the United States, where weekly unemployment claims and producer price data are scheduled. The Federal Reserve's singular emphasis on the labour market's health has resulted in an increased emphasis on jobless claims. A negative result, which surpasses the anticipated 230,000, could raise the possibility of a 50 basis point reduction.

"The PPI is anticipated to have increased by 0.1% last month, according to economists. Several components of the data will assist analysts in the refinement of inflation forecasts for the personal consumption expenditures price index, the Federal Reserve's preferred inflation indicator."

The ECB rate announcement is due at 1315 BST.

In equity markets, Roche was under the cosh after disappointing results from an early-stage trial of a weight-loss drug.

Elsewhere, Trainline surged as it lifted its full-year profit outlook following a strong first half, which was ahead of its expectations.