Thursday saw a rise in European shares as the European Central Bank (ECB) seemed to predict a slowdown in inflation and maintained steady interest rates. Additionally, Novo Nordisk saw a record high due to encouraging updates about an experimental weight loss drug.
The pan-European Stoxx 600 was also on the rise, reaching a new record high with an uptick of 1 per cent, which saw a particular climb in tech and real estate stocks.
Bond returns in the Eurozone also decreased, helping the equity market. Financial markets predicted over 100 basis points of interest rate cuts in 2024, a jump from the 92 points that were speculated before the policy was decided.
The ECB maintained its high borrowing rates, but suggested that this could decrease as inflation was slowing down faster than expected. “A quick response has been noted in the markets to the lower predictions for growth and inflation, as given by the ECB’s latest forecasts,” remarked Stuart Cole, Equiti Capital’s head economist.
Permanent TSB in Dublin, however, saw a 12% fall reaching €1.40, despite a surge in operating profit and indications of a return to paying dividends, a first since the beginning of the financial crisis. The bank’s profit rose to €164 million from just €14 million the previous year, due largely to acquired loans from Ulster Bank and a surge in interest rates. The bank’s shares, nevertheless, saw a drop with investors considering its outlook for the year, which suggests a significant drop in basic profits as investments rise.
Competitors AIB and Bank of Ireland also fell – 3.6% and 0.2% respectively – as a result of a challenging day for financial entities all over Europe, following the ECB’s decision and announcement concerning the rate.
Additionally, despite reports of record profit and revenue last week, homebuilder Cairn saw a decrease of 2%. Kerry, Glanbia, and Smurfit Kappa, however, saw gains.
In other news, Novo Nordisk’s shares increased by 7.1% after promising early trial data was released for its highly anticipated experimental weight loss drug, amycretin, which showed better results in weight loss compared to its popular treatment, Wegovy.
Last but not least, the majority of healthcare sector led with a 2.2% growth, reaching a near two-year high with shares in Denmark-based Zealand Pharma increasing a significant 10.2% after BTIG initiated a “buy” rating.
Teleperformance, a French call-centre company, experienced a stock plummet of 19.6%, due to their projected restricted growth in 2024, following unmet yearly revenue objectives. German fashion company Hugo Boss also saw a 11.7% drop in its stocks following predictions of a significant decrease in sales growth this year, and a profit that’s expected to fall short of estimates.
In London, British midcap stocks hit an all-time high in three months on Thursday, driven by Virgin Money’s potential buyout and Rentokil’s profit surge, which caused blue-chip shares to lift. Nationwide Building Society’s proposition to buy Virgin Money UK, a deal potentially worth £2.9 billion, led to a 35% rally in the bank’s shares – a record high. This purchase proposition is a speculated move on Nationwide’s part to become the second-largest savings and mortgage provider in Britain, and represents a 38% premium to Virgin Money’s closing price on the previous Wednesday.
Across the Atlantic, Wall Street’s primary indices demonstrated an ascent on Thursday, primarily spearheaded by Nasdaq, which was buoyed by chipmakers; the S&P 500 also managed to hit an intraday record peak, signalling investors’ optimism regarding the Federal Reserve’s predicted interest rate cut in June. The Philadelphia Semiconductor index recorded a new high, with Qualcomm steering the rally among chipmakers. High-profile growth and tech stocks including Meta and Nvidia also surged by 2.7% and 3.4% respectively.
Jerome Powell, the Chair of the Federal Reserve stated on Thursday that the US central bank is now very close to being confident enough in the downward trajectory of inflation towards their 2% goal, in order to start reducing interest rates. This comment maintains the investors’ anticipation of an interest rate cut in June, boosting US stocks which had been wavering prior to the testimony.
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