EUROPEAN stocks settled lower on Thursday, after the European Central Bank cut interest rates by 25 basis points as expected, and left the door open for further easing to support a struggling economy amid heightened political risks.
The pan-European Stoxx 600 index closed a choppy session at 519.20 points, down 0.14 per cent, although rate-sensitive eurozone bank shares edged up 0.3 per cent.
The ECB lowered interest rates for the fourth time this year as inflation worries have diminished, shifting the debate to whether the cuts are fast enough to support a stagnant economy that is also at risk of a fresh trade war with the US.
However, some investors focused on President Christine Lagarde’s comments who stressed that the fight against inflation was not over, post which yields on the benchmark German bond inched up.
Market participants are now pricing in about 120 basis points worth of interest rate cuts by the end of 2025, according to data compiled by LSEG.
“The ECB is sticking to the script. Inflation is slowing, leading indicators suggest wage growth will decelerate, and growth is soggy but not catastrophic,” said Mathieu Savary, European strategist at BCA Research.
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“As a result, maintaining a consistent pace of easing is appropriate, and allows to keep ammunitions in the chamber if a trade war were to emerge next year.”
The Stoxx index has gained over 8 per cent so far this year on expectations of lower borrowing costs, while the US benchmark S&P 500 advanced by over 27 per cent.
The eurozone has tried to navigate a slowing economy, political instability in Germany and France and sluggish demand from top consumer China this year. Given that a majority of European companies are export dependent, a trade war with the US remains a significant headwind in 2025.
Central banks elsewhere in the region including the Swiss National Bank and the Denmark central bank lowered their respective policy rates.
Swiss stocks ended higher by 0.3 per cent, while Danish equities lost 0.5 per cent.
On the Stoxx index, basic resources was the top sectoral decliner with a 1.7 per cent drop, while luxury led gains with a 0.9 per cent rise.
Among individual movers, Italy’s Brunello Cucinelli rose 8 per cent after the luxury group upgraded its 2024 revenue guidance.
SThree tumbled 26 per cent after the British recruiter warned on the current financial year profit, citing tough hiring market conditions amid increased political and macro-economic uncertainty, particularly in Europe.
Diageo rose 2.7 per cent after UBS upgraded the stock, citing positive signs for the spirit maker’s US business.
Swiss contract drugmaker Lonza rose 4.9 per cent following plans to exit its capsules and health ingredients business. REUTERS
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Publish date : 2024-12-12 14:14:00
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