Europe’s STOXX 600 climbs as focus shifts to US central bank rate verdict

4:45 am Friday, September 13th, 2024

By Shubham Batra

(Reuters) – European stocks advanced on Friday and were poised for weekly gains, supported by miners, while investors shifted their focus to the U.S. Federal Reserve ahead of a long-awaited monetary easing at its meeting next week.

The pan-European STOXX 600 index was up 0.5% at 514.4 points, with France’s CAC 40 rising 0.3% after consumer prices in the region’s second-largest economy rose 2.2% year-on-year in August, in line with its preliminary reading.

Autos were the top gainers among sectors, jumping 1.5% and were on track for their best day in over a month.

Miners rose 0.8%, as copper prices hit a two-week high on buying ahead of a Chinese holiday and amid stimulus hopes after President Xi Jinping pushed for measures to boost economic growth. [MET/L]

After the European Central Bank (ECB) lowered its deposit rate to 3.5% on Thursday, policymakers do not see an interest rate cut in October, barring a major deterioration in the outlook for growth, sources told Reuters.

ECB policymaker Joachim Nagel said inflation in the euro zone, including a core measure that strips out volatile prices, is going in the right direction, as he backed the latest rate cut.

Investors are now wagering on the size and extent of the rate cut by the U.S. central bank next week, with money markets seeing a nearly 40% chance for a 50-bp reduction on Sept. 18.

“We’re still expecting the Fed to cut by 25 basis points. But we’re so far from neutral right now that a 50 basis point cut should not be seen as a sign of danger on the horizon. So in that sense, it’s entirely possible that they will make a more sizable cut next week,” said Gene Salerno, chief investment officer at SG Kleinwort Hambros.

Former chief of the New York Fed Bill Dudley said he thinks there’s a strong case for a 50-bp cut.

Among individual movers, AstraZeneca was the top loser with a 2.1% fall after Deutsche Bank cut the stock’s rating to “sell” and lowered its price target on Friday.

Worldline shares dropped 16.5% to an all-time low, after another profit warning and announcement of the departure of its CEO.

Meanwhile, Euro zone’s industrial production reading for July and comments from ECB president Christine Lagarde at the Eurogroup meeting in Budapest later in the day will be keenly monitored for any clues on the bank’s interest-rate path.

(Reporting by Shubham Batra in Bengaluru; Editing by Sherry Jacob-Phillips and Mrigank Dhaniwala)