Federal Reserve’s Rate Cut Boosts European Stocks
European markets, including the FTSE 100 (^FTSE), saw gains on Thursday following a significant interest rate cut by the US Federal Reserve. This move marked the Fed’s first rate cut in over four years.
The Federal Reserve reduced US interest rates by half a percentage point, signaling a shift after maintaining rates at a 23-year high since July 2023. The central bank has outlined a plan for two more cuts this year, followed by four additional reductions in 2025.
Fed Chair Jerome Powell emphasized the Fed’s proactive stance, stating, “We don’t think we are behind. We think this is timely but you can take this as a sign of our commitment not to get behind.”
Analyst Insights on the Fed’s Decision
Nomura strategist Chetan Seth commented on the Fed’s decision, noting that the substantial rate cut reflects the central bank’s intention to support the US economy and achieve a ‘soft landing’. Seth suggested that, as long as the US avoids a recession in the near future, the Fed’s preemptive rate cut should generally benefit stock markets.
Bank of England’s Expected Decision
Later on Thursday, the Bank of England (BoE) is anticipated to keep UK interest rates unchanged at 5%, following a reduction from 5.25% in August. Current market expectations suggest an 80% chance that the BoE will maintain rates, with only a 20% probability of a further cut to 4.75%.
Market Movements
In early trading, London’s FTSE 100 index was up by 0.9%. Meanwhile, Germany’s DAX (^GDAXI) experienced a 0.8% decline, and France’s CAC (^FCHI) rose by 1.3%. The pan-European STOXX 600 (^STOXX) increased by 1%.
In the US, Wall Street is poised for a positive opening, with S&P 500 futures (ES=F), Dow futures (YM=F), and Nasdaq futures (NQ=F) all showing gains.
Additionally, the pound sterling appreciated by 0.3% against the US dollar (GBPUSD=X), trading at 1.3251.
