Askume, Sept 19 – European stocks rose on Thursday after the Federal Reserve cut interest rates by 50 basis points and said it would lower rates further, raising expectations of a slowdown in the U.S. economy.
Continental Europe’s STOXX 600 index (.STOXX) closed up 1.4%, its highest closing price in more than two weeks.
Most local stock markets also rose sharply, with Germany’s blue-chip benchmark (.GDAXI) rising 1.6% to 19,002.38 points, its highest closing price on record.
Growth-sensitive technology stocks (.SX8P) were in line with Wall Street’s tech heavyweights, rising 3.5%, while mining stocks (.SXPP) rose 3% as a long-awaited Fed rate cut took most of the ground and pushed metals prices higher. The dollar weakened.
Utilities (.SX6P) and telecoms (.SXKP) fell more than 1%.
The Federal Reserve cut interest rates sharply on Wednesday, kick-starting a monetary easing cycle and adjusting the benchmark policy rate to a range of 4.75%-5.00%.
Fed Chairman Jerome Powell said the move was intended to reflect policymakers’ commitment that unemployment will stay low while inflation eases.
“The September Federal Open Market Committee meeting showed that the Fed’s response was clearly dovish,” said Frederic Ducrozet, head of macroeconomic research at Swiss-based Pictet Wealth Management.
“Chairman Powell seems to be more cautious than usual in taking an accommodative stance, and his tolerance for further laxity in the labor market appears to be very low.”
Following the Fed’s action, analysts are also wondering how the European Central Bank (ECB) will act since it has opted to cut interest rates by a modest 25 basis points in June and September.
“The Fed’s resolve and an acceleration in euro zone inflation could lead the ECB to ease restrictions more quickly in 2025,” Pictet’s Ducrozet said.
At the same time, the Bank of England kept interest rates at 5.0% and expressed caution about future interest rate cuts, and did not significantly reduce its bond holdings.
Britain’s blue-chip FTSE 100 index (.FTSE) closed up 0.9%, while sterling rose 0.5% against the dollar.
Norges Bank also kept its policy rate unchanged at 4.50%, a 16-year high , and said any rate cut would have to wait until the first quarter of next year. The Norwegian benchmark exchange(.OSEAX) closed up 0.5%.
Among other key stocks, shares of Italy’s Campari SA (CPRI.MI) fell more than 7% in the previous session, but rose 9.5% after the company said its major shareholder would invest 100 million euros in the spirits maker.
Poland’s largest e-commerce platform Allegro (ALEP.WA) reported that profit in its domestic market, its biggest market, fell more than 8% in the quarter, despite slower profit growth in the second quarter.
