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Pallade Veneta - European equities advance before Bank of England rate call

European equities advance before Bank of England rate call

POLITICS 20.06.2024
European equities advance before Bank of England rate call
European equities advance before Bank of England rate call / Photo: HENRY NICHOLLS - AFP

European stock markets rose Thursday as dealers awaited the Bank of England's latest decision on interest rates, after Switzerland cut borrowing costs and Norway kept its status quo.

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The euro remained under pressure over France's political uncertainty, with just two weeks to go until a snap election in the country.

Switzerland's franc dipped against the dollar after the Swiss National Bank (SNB) announced its second straight interest-rate cut, having become in March the first Western central bank to slash borrowing costs that had been raised to battle inflation.

The Bank of England (BoE) is widely expected to keep its key rate at a 16-year high later Thursday despite official data Wednesday showing UK headline consumer inflation had finally come down to the bank's two percent target.

- Central banks -

"Central banks are in focus... SNB cuts rates, but don't expect the BoE to follow suit," said Kathleen Brooks, research director at trading firm XTB.

Not wishing to influence politics, the BoE will likely take a wait-and-see stance also owing to the closeness of its meeting to Britain's general election on July 4.

Prime Minister Rishi Sunak's Conservatives are badly trailing Keir Starmer's opposition Labour in opinion polls.

Should the BoE sit tight, market watchers will be looking for clues on whether the UK central bank could cut at the following meeting at the start of August.

The European Central Bank cut earlier this month, while the US Federal Reserve is expected to introduce only one rate reduction this year.

Central banks worldwide had ramped up borrowing costs in recent years to control inflation, which surged when economies emerged from Covid pandemic lockdowns and accelerated after energy producer Russia invaded agricultural power Ukraine in early February 2022.

Elsewhere on Thursday, Asian stock markets were mixed as investors attempted to gauge the Fed's rate outlook.

With Wall Street closed Wednesday, there were few catalysts to drive buying, though sentiment has been buoyed this week by recent data indicating the world's top economy is slowing gradually, giving the Federal Reserve some freedom to ease monetary policy.

Traders are closely following the utterances of US central bank officials on their outlook for rates, with most warning that while inflation was on a downward trajectory, they wanted to see more evidence before committing to a cut.

Analysts say this means there will be two reductions at most, with many predicting just one this year -- in line with the Fed's "dot plot" gauge released last week.

- Key figures around 1015 GMT -

London - FTSE 100: UP 0.2 percent at 8,220.45 points

Paris - CAC 40: UP 0.9 percent at 7,640.40

Frankfurt - DAX: UP 0.7 percent at 18,199.18

EURO STOXX 50: UP 0.9 percent at 4,928.30

Tokyo - Nikkei 225: UP 0.2 percent at 38,633.02 (close)

Hong Kong - Hang Seng Index: DOWN 0.5 percent at 18,335.32 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,005.44 (close)

New York - Dow: Closed for a public holiday

Euro/dollar: DOWN at $1.0725 from $1.0745 on Wednesday

Euro/pound: DOWN at 84.42 pence from 84.44 pence

Dollar/yen: UP at 158.43 yen from 157.90 yen

Pound/dollar: DOWN at $1.2704 from $1.2726

West Texas Intermediate: FLAT at $80.71 per barrel

Brent North Sea Crude: UP 0.2 percent at $85.27 per barrel

burs-rfj/cw

Z.Ottaviano--PV

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