EUROPEAN stocks closed less than 1 per cent away from record high levels on Thursday (Oct 17) after the European Central Bank (ECB) delivered a widely expected 25-basis-point rate cut, even though it refrained from offering new clues about its next move.
The continent-wide Stoxx 600 index ended higher by 0.8 per cent, following a two-day decline. Bourses in most major markets including France and Italy trended higher, and Germany’s DAX closed at an all-time high.
The ECB reduced its interest rates by 25 bps, following a similar-sized cut in September, which marked its first back-to-back rate cuts in 13 years.
However, the central bank did not provide any indication about future moves in its statement and instead repeated its mantra that decisions will be data-dependent.
This came in the face of money markets’ expectations of three further reductions to March 2025. Inflation in the eurozone is now increasingly under control and the economic outlook has worsened.
“Another cut is likely in December, and we expect this will be followed by a series of cuts at every meeting through to June next year,” said Dean Turner, chief eurozone economist at UBS Global Wealth Management.
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“Small and mid-caps in the eurozone offer attractive value and should be one of the main beneficiaries of ECB rate cuts.”
Defence stocks led sectoral gains with a 2.6 per cent jump, while cyclicals such as financial services, banks and industrial goods were among the top performers.
The small-caps and mid-cap indexes rose about 0.4 per cent each to touch their respective two-week highs.
Investor sentiment was already upbeat on the back of a slew of robust corporate earnings ahead of the monetary policy verdict.
Finnish bank Nordea rose 6.3 per cent, supporting a more than 1 per cent rise in the bank index, after raising its forecast and announcing a new share buyback programme.
French-listed Sartorius rose 17.7 per cent, topping the Stoxx 600, after the pharmaceutical equipment supplier’s better-than-expected bio-processing order intake boosted its nine-month results.
British pest control company Rentokil Initial rose 8.7 per cent on plans to expand initiatives to increase organic growth in North America following higher group revenue growth.
On the flip side, Mondi dropped 7.4 per cent after the British packaging company reported a lower third-quarter core profit.
Nokia fell 2.5 per cent after its quarterly sales missed estimates. A Reuters report said it has laid off about a fifth of its employee base across Greater China and plans to cut another 350 jobs across Europe as part of efforts to lower costs.
Nestle reversed early losses and closed up 2.5 per cent, with analysts pointing to supportive comments from the consumer giant’s management. It had initially trimmed its full-year sales forecast. REUTERS
