Anticipation of a forthcoming announcement from the European Central Bank (ECB) concerning a cut in the main interest rates aroused positive responses from investors, leading to an elevation in European shares on Wednesday. Despite a slump of approximately 0.5 per cent in the previous session, the Stoxx 600, a pan-European index, surged by 0.8 per cent. This upward trend was spearheaded by the technology sector which grew by 3.7 per cent, showcasing its most impressive one-day performance in over a quarter of a year.
It is predicted that on Thursday afternoon, the ECB will slash its prevailing interest rates by 0.25 points. This adjustment would adjust the deposit rate to 3.75 per cent and the key lending rate to 4.25 per cent.
Meanwhile, in Dublin, the Iseq All-Share index saw minimal change, closing at 9,940.36. Both AIB and the Bank of Ireland experienced a slight fall of 0.1 per cent and 0.3 per cent respectively, closing at €5.05 and €10.12. A rise in official rates, particularly within the deposit rates, has contributed significantly to the income growth of the two Irish banks in the past few years.
Housebuilders, on the other hand, saw an increase, with Cairn Homes ascending by 0.8 per cent to €1.72, and Glenveagh Properties growing by 1.2 per cent to €1.40. This can be attributed to the notion that the sector has been boosted by lower borrowing costs. However, Corre Energy plummeted by 7.5 per cent to a dismal 37 cents due to the renewable power storage developer’s continuous effort to acquire substantial external investment after a recent call for €2.76 million in emergency funding.
In London, the FTSE 100 closed with an increase of 0.2 per cent, further solidified by economic data, enhancing expectations for a US Federal Reserve rate cut in September. Investors are equally intrigued by the imminent ECB interest rate decision. Indications of a slowing US job market, exhibited by fewer job opportunities and a lower than forecasted rise in private payroll informed predictions of a US rate cut in September.
“The speculations concerning when the US will introduce an interest rate cut has stopped at a significantly positive point, leading to the belief that the Fed still intends to make the cuts,” explained Susannah Streeter, head of money and markets at Hargreaves Lansdown. She further added that this has influenced the FTSE 100, which predominantly operates on a global scale.
In London, both the automobile and components industry along with pharma and medical equipment witnessed an upward trajectory, achieving a growth of 2.9%, 2.2% respectively and 1.2%. Conversely, B&M, the budget variety store company, experienced a plunge of 7.3% after publishing the introductory annual findings. Similarly, Centrica, the utilities company, suffered a drop of 4.8%, as it announced its profits would be heavily inclined towards the first half of the current year.
Meanwhile, in Europe, after an optimistic statement from CFO Roger Dassen about imminent orders from their major client TSMC, ASML’s shares surged up to 8.1%. Likewise, semiconductor-related businesses such as BE Semiconductor Industries and ASMI witnessed a shared rise of 4.7%. Inditex, the high-street fashion brand Zara’s parent company, saw a leap of 3.7% in response to an increase in sales from its Spring/Summer lines. On the other hand, Elekta, the Swedish radiation therapy equipment manufacturer, reported a significant fall of 18% owing to an unexpected dip in the fourth-quarter earnings.
Across the pond in New York, the stock market showed a bullish trend early afternoon, with the S&P 500 and the Nasdaq gaining, due to investors’ heightened anticipations of an early initiation of the Federal Reserve’s slackening phase. Multinational corporations including Nvidia, Microsoft and Amazon saw their stocks rise. Presently, the odds for a Fed rate cut in September are nearly at 69%, an increase from below 50% the previous week, as per the CME’s FedWatch tool.
Intel’s shares escalated as Apollo Global Management, the buyout firm, agreed to buy a 49% equity stake in its Fab 34 facility situated in Leixlip, Co Kildare, amounting to $11 billion (€10.1 billion). CrowdStrike, the cybersecurity technology company, also saw a jump in its shares after forecasting second-quarter revenue beyond expectations, backed by tough demand for its services.