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European stock markets hit record highs on rate cut hopes

US political concerns continue to weigh on consumer confidence
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European stock markets struck fresh record highs Friday on growing hopes that central banks are close to cutting interest rates.

Wall Street stocks also climbed to sit near their record levels, while oil prices edged up as investors tracked developments in the Middle East.

London, Paris, Frankfurt and Amsterdam all hit new heights, with global equities benefitting also from strong first-quarter earnings.

“European markets are on the rise despite concerns that a resurgence in UK growth could yet hinder hopes for a dovish pivot from the Bank of England in the months ahead,” noted Joshua Mahony, chief market analyst at Scope Markets.

Britain exited a shallow recession with better-than-expected growth in the first quarter, official data showed Friday, in a boost to embattled Prime Minister Rishi Sunak ahead of the country’s general election this year.

In the United States, data has indicated that the labour market is beginning to soften, giving the Federal Reserve room to ease monetary policy.

The forecast-beating figures showing that unemployment claims rose to their highest level since August followed news that far fewer new posts were created in April than expected.

In reaction, US Treasury bond yields, a proxy for interest rates, have moved lower.

The US readings soothed worries that borrowing costs would remain elevated through the year after a series of above-estimate inflation readings in the first four months.

Still, speculation is growing that the Fed will cut rates in September, though analysts urged caution as decision-makers were keen to see evidence that prices are being brought under control.

US inflation data for April will be released next week.

“The market’s assumption throughout this week is that there won’t be an inflation scare and that the Fed will find some policy comfort in the coming inflation reports,” said analyst Patrick O’Hare.

Also helping boost sentiment he said was Fed chairman Jerome Powell’s assurance last week that the central bank’s next rate move wouldn’t be a hike, allowing market participants can trade around the idea of a rate cut.

The Bank of England on Thursday signalled a rate cut this summer after keeping UK borrowing costs at the highest level in 16 years to tame inflation.

The European Central Bank is expected to cut its rates in June.

With Wall Street performing strongly Thursday, Asian investors pushed regional stocks higher ahead of the weekend.

Hong Kong continued an impressive run that has seen it enter a bull market after climbing more than 20 percent from its January lows.

The gains were boosted by news that city officials were considering a plan to exempt individuals from paying tax on their dividends from stocks bought via the stock connect with mainland bourses.

Elsewhere Friday, oil prices extended gains as investors tracked developments in the Middle East, with Hamas on Friday saying its team at Gaza ceasefire talks in Cairo had left, adding that the “ball is now completely” in Israel’s hands.

State-linked Egyptian outlet Al-Qahera News reported Thursday that representatives of both camps had left after two days of negotiations aimed at finalising a ceasefire deal.

New York – Dow: UP 0.2 percent at 39,481.15 points

New York – S&P 500: UP 0.3 percent at 5,227.50

New York – Nasdaq Composite: UP 0.2 percent at 16,384.92

London – FTSE 100: UP 0.7 percent at 8,442.38

Paris – CAC 40: UP 0.5 percent at 8,228.75

Frankfurt – DAX: UP 0.5 percent at 18,776.59

EURO STOXX 50: UP 0.6 percent at 5,085.24

Tokyo – Nikkei 225: UP 0.4 percent at 38,229.11 (close)

Hong Kong – Hang Seng Index: UP 2.3 percent at 18,963.68 (close)

Shanghai – Composite: FLAT at 3,140.77 (close)

Euro/dollar: DOWN at $1.0777 from $1.0785 on Thursday

Pound/dollar: UNCHANGED at $1.2524

Dollar/yen: UP at 155.70 yen from 155.47 yen

Euro/pound: DOWN at 86.04 from 86.09 pence

Brent North Sea Crude: UP 0.4 percent at $84.24 per barrel

West Texas Intermediate: UP 0.5 percent at $79.68 per barrel

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Agence France-Presse (AFP) is a French international news agency headquartered in Paris, France. Founded in 1835 as Havas, it is the world's oldest news agency.

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