On Thursday, global equities cautiously advanced, witnessing brief all-time highs in Frankfurt and Paris, following the decisions by the European Central Bank (ECB) and the Bank of England to keep interest rates unchanged. This comes after the Federal Reserve propelled Wall Street to significant gains, with indications of a shift towards potential rate cuts in the coming year.
Having implemented a series of rate hikes over the past two years to curb rising inflation, the Bank of England joined the ECB and the Federal Reserve in maintaining a pause on interest rates for the second consecutive meeting. The Federal Reserve’s indication of future monetary easing in the next year had sparked.
On Thursday, Wall Street exhibited cautious movement, with the Dow and Nasdaq showing modest gains of around 0.3 percent two hours into the trading session. In Europe, Frankfurt’s DAX index and Paris’ CAC 40 briefly reached all-time highs before retracting, with the German index closing slightly in the negative, while Paris posted a modest 0.6 percent gain. The European Central Bank (ECB), as anticipated, held off on adjusting interest rates but issued a warning that the battle against inflation is ongoing.
ECB President Christine Lagarde emphasized the need for policymakers to remain vigilant in the fight against inflation, dispelling market expectations of imminent interest rate cuts in the next year. Lagarde mentioned that rate cuts were not discussed due to concerns that inflation could rise again in the near term. The ECB also lowered its growth forecasts for the current year and the next.
London’s market closed 1.3 percent higher as the Bank of England (BoE) opted to maintain its key rate at a 15-year peak of 5.25 percent. This decision was influenced by the decline in UK inflation, despite it remaining elevated, suggesting that monetary policy is likely to remain restrictive for an extended period.
Craig Erlam, a senior market analyst with Oanda, observed that central banks provided little excitement for investors, leading to a lack of market fireworks. Richard Flax, chief investment officer at Moneyfarm, noted that the ECB appears to position itself as more hawkish than the Federal Reserve, ruling out rate cuts until data is more conducive, which contrasts with market expectations.
In contrast to the Federal Reserve’s pivot, the ECB is not considering rate cuts at the moment, according to Juliette Cohen, an analyst with CPRAM. The US dollar weakened against the euro and pound, while oil prices rebounded almost four percent from recent six-month lows.
