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On Thursday, London stocks ended the day on a positive note, driven by the Bank of England’s anticipated decision to maintain interest rates. This move came as part of a broader upward trend across European stock markets, which were buoyed by the Federal Reserve’s significant rate cut the previous evening.
The pan-European benchmark index advanced by 1.4% to 521.60, with major indices throughout the continent registering solid gains. The Cac 40 in Paris notably outperformed, surging by 2.2%. The Stoxx 600 index is now approaching its previous peak of 525.05, achieved on August 30.
The Federal Reserve’s decision on Wednesday to lower the Federal Funds Rate by 50 basis points to a range of 4.75-5.0% marked the first rate reduction since March 2020 and the largest cut since the financial crisis of 2008. This move was met with approval from market participants, who were encouraged by the Fed’s positive assessment of the U.S. economy. Chris Beauchamp, chief market analyst at IG, noted that the Fed’s actions and optimistic outlook had bolstered global stock markets, instilling confidence in continued economic support.
In the UK, the Bank of England held borrowing costs steady at 5% as anticipated, signaling a cautious approach to future rate cuts. The Monetary Policy Committee, which had previously reduced rates for the first time in four years by 25 basis points in August, voted 8 to 1 to maintain the current rate. External member Swati Dhingra advocated for a further reduction of 25 basis points. Governor Andrew Bailey commented that the economy was evolving as expected and indicated that gradual rate reductions could be feasible, provided inflation remains under control.
Norway’s central bank also kept its interest rates unchanged at a 16-year high of 4.5%, but signaled plans to initiate a rate-cutting program in early 2025. Capital Economics’ Andrew Kenningham suggested that rate cuts might occur sooner than planned, potentially starting in December, due to rising unemployment and a decrease in reported labor shortages.
In market movements, Davide Campari-Milano saw a 10% increase following a sell-off due to the sudden departure of its CEO. Reports indicated that the company's major shareholder, Lagfin, might purchase up to €100 million in shares. Conversely, Allegro, Poland’s largest e-commerce platform, led the declines on the Stoxx 600 with an 8% drop, as it forecasted slower earnings growth for the third quarter. Rolls-Royce emerged as a significant gainer in London, rising 5% after being selected to develop mini nuclear power plants for the Czech government.
