European Stocks Advance as Traders Await Fed Rate Cut After ECB

(Bloomberg) — European stocks gain after the European Central Bank delivered an interest rate cut that was in-line with expectations.

The Stoxx 600 Index was up 0.8% at the close in London, having earlier gained as much as 1.3%. Most sectors rose, led by technology and mining stocks while utilities dipped. 

The ECB cut the key deposit rate by 25 basis points to 3.5% as analysts had predicted, the second reduction this year. It trimmed its forecasts for gross domestic product in 2024, 2025 and 2026.

“We shall remain data-dependent,” ECB President Christine Lagarde told reporters in Frankfurt, adding that Thursday’s decision was unanimous. “That is particularly justified in view of the uncertainty that abounds.”

“A declining path is not pre-determined,” she said. “Neither in terms of sequence, nor in terms of volume.”

The move higher in European stocks echoed a move in global stocks as US inflation data on Wednesday supported bets for a Federal Reserve rate cut next week. Meanwhile, US producer prices picked up only slightly in August and categories that feed into the Fed’s preferred inflation gauge were muted.

In Europe, the risk is that the ECB will need to cut rates more than the market is currently pricing, said Daniel Murray, the chief executive officer of EFG Asset Management in Switzerland. 

Among single stocks, Commerzbank AG’s executive board is reviewing its defense strategy as it prepares for a potential takeover approach by UniCredit SpA. Roche Holding AG’s shares slid after its closely-watched experimental obesity pill was tied to side effects, including nausea and vomiting.

For more on equity markets:

• Rock-Bottom Valuations Not Enough to Boost Autos: Taking Stock
• M&A Watch Europe: Commerzbank, Capital & Regional, DSV, Swisscom
• Europe Banks Lead Block Trades on $2.2 Billion Day: ECM Watch
• US Stock Futures Little Changed; Oxford Industries Falls
• Under Asking: The London Rush

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