Europe heads higher as ECB cuts interest rates

(Alliance News) - Stock prices in Europe close higher on Thursday, after the European Central Bank cut its interest rates for the first time since 2019.

The FTSE 100 index closed up 38.39 points, 0.5%, at 8,285.34. The FTSE 250 ended up 42.47 points, 0.2%, at 20,715.88, and the AIM All-Share closed down 2.43 points, 0.3%, at 796.54.

The Cboe UK 100 ended up 0.4% at 825.85, the Cboe UK 250 closed down 0.1% at 18,135.48, and the Cboe Small Companies ended down 0.4% at 16,848.63.

In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt both closed up 0.4%.

The European Central Bank cut interest rates on Thursday for the first time in five years, beating the US Federal Reserve and Bank of England to the punch.

The Frankfurt-based official lender cut rates by 25 basis points. This means that the interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility now stands at 4.25%, 4.50% and 3.75%, respectively.

In a statement the ECB said: "Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady."

Eyes remained on the subject of inflation.

"Let there be no doubt in our determination to tame inflation," ECB President Christine Lagarde told reporters at a press conference after the interest rate decision.

She said future interest rate decisions will follow a "data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction."

Analysts at Lloyds Bank said that is "no strong indication of back-to-back rate cuts next month."

"The likelihood of a July cut has diminished, particularly after recent data showed stickiness in Eurozone wage growth and still elevated services price inflation. Markets now see the next rate cut in either September or October," they continued.

Eyes will now shift to the US Federal Reserve's interest rate decision, which will be announced on Wednesday next week.

At the central bank's fourth meeting of 2024, the Fed is expected to leave interest rates unchanged.

Yet, AJ Bell's Russ Mould said: "The Bank of England and Federal Reserve might give the impression they aren’t swayed by what the ECB and other countries do, but the greater the number of central banks cutting, the more pressure they will be under to do the same."

The pound was quoted at USD1.2783 at the London equities close Thursday, up compared to USD1.2764 at the close on Wednesday. The euro stood at USD1.0882 at the European equities close Thursday, higher against USD1.0866 at the same time on Wednesday. Against the yen, the dollar was trading at JPY156.03, down compared to JPY156.19 late Wednesday.

In the FTSE 100, Antofagasta closed up 2.9%.

On Wednesday, Antofagasta said it completed the process of entering into a water transportation agreement, with payment due later this year.

In March, the Chile-focused miner signed a USD2.5 billion financing agreement with a group of international lenders on a twelve-year term with a four-year drawdown period.

In the FTSE 250, John Wood jumped 8.8%.

John Wood on Wednesday said it has decided to engage with Dar Al-Handasah Consultants Shair & Partners Holdings Ltd after evaluating a fourth bid proposal received last Wednesday.

The Aberdeen, Scotland-based consulting and engineering firm noted that this "fourth and final" offer from the Beirut-founded company, which is known as Sidara, is worth 230 pence per share. It values Wood Group at around GBP1.58 billion.

Sidara has steadily increased its bid proposal from an initial 205p per share.

The deadline by which Sidara has to decide whether to make a formal bid has been extended to July 3.

On London's AIM, Clontarf Energy plummeted 52%.

The oil, gas and minerals explorer said it has encountered a setback, as its submission for the Bolivia Lithium project was not accepted.

Clontarf maintained that it will continue to argue the case, and is optimistic that this subject may be revisited at a later date.

Stocks in New York were mixed at the London equities close. The DJIA was up 0.1%, whilst the S&P 500 index down 0.1% and the Nasdaq Composite down 0.2%.

Brent oil was quoted at USD79.69 a barrel at the London equities close Thursday, up from USD77.25 late Wednesday. Gold was quoted at USD2,374.90 an ounce at the London equities close Thursday, higher against USD2,351.20 at the close on Wednesday.

In Friday's UK corporate calendar, there are full year results from Ondine Biomedical.

The economic calendar for Friday has the Halifax house price index for the UK at 0700 BST. There is also gross domestic product data from the eurozone, as well as an unemployment reading at 1000 BST.

The main focus of the day, however, will by the US nonfarm payrolls data, which is out at 1330 BST.

According to FXStreet, US nonfarms are expected to rise by 185,000 in May, picking up from 175,000 in April.

The US unemployment rate is expected to be unchanged at 3.9% in May.

By Sophie Rose, Alliance News senior reporter

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