Global stocks and the euro surged ahead of the European Central Bank (ECB) interest rate cuts on Thursday 6 June 2024. The ECB decreased borrowing costs from 4% to 3.75% for the first time in almost five years.
Expected ECB Rate Cuts Drive Global Stocks And Euro Uptick
Reuters indicated that the pan-European STOXX 600 climbed by 0.8% and the MSCI All World Country Index steadily approached a high during Thursday’s trading. This comes after the S&P 500 and Nasdaq both achieved new records in the wake of Nvidia Corporation (NVDA) overtaking Apple Inc. (AAPL) as the second most valuable tech giant worldwide.
The euro further strengthened its position and sat at $1.09 early on Friday 7 June 2024. Forex traders seemingly waited for the ECB announcement before making market moves.
European lending rate cuts closely follow Canada’s on Wednesday 5 June 2024 and come just before the EU elections. Experts predict that votes will mirror discontent with cost-of-living strains.
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According to the BBC, the ECB’s president, Christine Lagarde, said that inflation improved significantly to support the rate cut. She did, however, warn that inflation may remain above the 2% benchmark for the rest of this year and 2025, which means that the ECB will keep interest rates “sufficiently restrictive for as long as necessary”. She added:
We are not pre-committing to a particular rate path.
Analysts commented that while this rate cut was expected, it still came as a welcome relief. The BBC quoted Lindsay James, an investment strategist at Quilter, who said:
The ECB has stolen a march on the Bank of England and [US] Federal Reserve – who are both potentially still a few months away from cutting – and will breathe life into an economy that desperately needs some form of stimulus.
