The continent-wide STOXX 600 index closed higher by 0.8%, following a two-day decline
European stocks closed less than 1% away from record high levels on Thursday after the 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 closed 0.8% higher, following a two-day decline. Bourses in most major markets including France and Italy trended higher, and Germany’s DAX ended at an all-time high.
The European Central Bank cut its interest rates by 25 basis points, 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 policy that decisions will be data-dependent.
This came in the face of money markets’ expectations of three further cuts through March 2025. Inflation in the euro zone 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, according to Dean Turner, chief eurozone economist at UBS Global Wealth Management.
Small and mid-caps in the euro zone offer attractive value and should be one of the main beneficiaries of ECB rate cuts, he said.
Defence stocks led sectoral gains with a 2.6% rise, while cyclicals such as financial services, banks and industrial goods were among top performers.
The small caps and mid cap indexes gained nearly 0.4% each to hit 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 decision.
Finnish bank Nordea gained 6.3%, supporting a more than 1% increase in the bank index, after raising its forecast and announcing a new share buyback programme.
On the flip side, Mondi slipped 7.4% after the British packaging company reported a lower third-quarter core profit.
Nokia slid 2.5% after its quarterly sales missed estimates.
