European stocks closed higher on Thursday with investors reacting positively to the European Central Bank’s monetary policy statement, and U.S. producer price inflation data.
The ECB reduced its key interest rates by 25 basis points, as expected, as the euro area growth is expected to slow on weaker demand and core inflationary pressures remain high, thanks to the stickiness of services inflation.
The Governing Council, led by ECB President Christine Lagarde, lowered the deposit facility rate, which is the new policy rate, to 3.5%.
The latest set of ECB Staff projections see headline inflation averaging 2.5% this year, 2.2% next year and 1.9% in 2026.
The bank expects inflation to rise again in the coming months, partly because previous sharp falls in energy prices will drop out of the annual rates. Price growth is expected to retreat to the 2% target over the second half of next year.
The Eurozone economy is projected to grow by 0.8% this year, 1.3% next year and 1.5% in 2026. The June projections were revised down, mainly owing to a weaker contribution from domestic demand over the next few quarters.
The pan European Stoxx 600 gained 0.8%. Germany’s DAX surged 1.03%, while the U.K.’s FTSE 100 and France’s CAC 40 ended higher by 0.57% and 0.52%, respectively. Switzerland’s SMI closed up 0.5%.
Among other markets in Europe, Austria, Belgium, Denmark, Finland, Iceland, Netherlands, Norway, Poland, Portugal, Spain, Sweden and Turkiye closed higher.
Greece and Russia ended on a weak note.
In the UK market, bank stocks found support after the Bank of England relaxed a proposed overhaul of the banking system.
Intermediate Capital Group, Sage Group, Fresnillo, JD Sports Fashion, Rolls-Royce Holdings and 3i Group gained 3 to 4.5%.
Anglo American Plc, Diageo, Airtel Africa, Endeavour Mining Plc, Glencore, Weir Group, Persimmon, Experian, Barratt Developments, Antofagasta, Taylor Wimpey, Vistry Group and Diploma climbed 2 to 3%.
M&G, Rentokil Initial, AstraZeneca, Haleon, Severn Trent, British American Tobacco and Sainsbury (J) lost 1 to 2.5%.
In the German market, Siemens Energy rallied more than 5%. Adidas, Deutsche Post, SAP, Daimler Truck Holding, Commerzbank and Rheinmetall gained 2 to 2.7%.
Deutsche Bank, HeidelbergCement, Siemens, Infineon, Deutsche Telekom, Deutsche Boerse and Brenntag ended higher by 1 to 1.8%.
Sartorius, Fresenius Medical Care, Porsche, Continental and Qiagen ended down 1.4 to 2%.
In the French market, Safran, Legrand, Schneider Electric, ArcelorMittal and Pernod Ricard gained 2 to 3.1%. Capgemini, Saint-Gobain, Societe Generale, BNP Paribas and TotalEnergies advanced 1.2 to 1.7%.
Edenred dropped more than 2.5%. Sanofi and Vinci both ended down 1.6%. Engie, Bouygues, Stellantis, Kering, Vivendi, L’oreal and Danone also closed weak.
Data from Destatis showed Germany’s wholesale prices declined at a faster pace in August on lower petroleum product prices. The data said wholesale prices decreased 1.1% year-on-year in August, bigger than the 0.1% drop in July.
The UK housing market conditions strengthened in August as the recent decrease in mortgage interest rates spurred demand and sales activity, the latest survey from the Royal Institution of Chartered Surveyors showed. The number of people looking to buy homes increased in August, with the balance rising to 15 from 4 in July.
The U.S. Labor Department said its producer price index for final demand crept up by 0.2% in August, while revised data showed prices were unchanged in July.
Economists had expected producer prices to inch up by 0.1%, matching the uptick originally reported for the previous month.
In Canadian economic news, data from Statistics Canada showed the total value of building permits surged by 22.1% month-over-month to $12.39 billion in July, following an upwardly revised 13% decline in the previous month.
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