European stocks ticked up on Thursday as traders took heart following an overnight rally on Wall Street, and the Bank of England raised interest rates in line with market expectations.
Europe’s region-wide Stoxx 600 was 0.1 per cent higher, recovering from two successive down days, led higher by strong healthcare sector performance. France’s Cac index rose 0.3 per cent.
Investors were encouraged overnight by US inflation data that came in slightly weaker than expected, bolstering traders’ belief that the Federal Reserve may soon halt its rate-tightening campaign.
The tech-heavy Nasdaq Composite added 1 per cent on Wednesday to close at its highest level since June. Lower rates increase the appeal of companies that promise long-term growth. Contracts tracking the S&P 500 and the tech-heavy Nasdaq were both flat ahead of the New York open on Thursday.
London’s FTSE 100 was down 0.4 per cent after the Bank of England raised its benchmark rate for the 12th consecutive time, by 0.25 percentage points to 4.5 per cent, as was anticipated by markets.
“Stubbornly high inflation, continued tightness of the labour market and further rate hikes by other major central banks have left the Bank of England with no choice but to raise its benchmark interest rate again”, said Yael Selfin, chief economist at KPMG UK. Traders expect rates to peak at 4.75 per cent in September.
The pound edged up against the dollar after the announcement, reversing earlier losses, to trade 0.3 per cent higher on the day at $1.26.
Meanwhile, uncertainty over the US debt ceiling continues to cast a shadow over markets after US Treasury secretary Janet Yellen warned earlier this month that the government could run out of money as soon as June 1.
Former US president Donald Trump on Wednesday urged Republican lawmakers to let the US default on its debts unless Democrats capitulate to demands for “massive” spending cuts. The yield on the interest rate-sensitive two-year Treasury rose 0.02 percentage points to 3.91 per cent, while the yield on the 10-year note was flat at 3.42 per cent.
Asian equities struggled for direction after weak inflation data in China pointed to weakening demand, but traders hoped the similarly soft US data would support stock market valuations. Chinese consumer price inflation slowed to its weakest level in two years.
Hong Kong’s Hang Seng index shed 0.2 per cent, while Japan’s Topix declined 0.3 per cent. China’s CSI 300 added 0.1 per cent and South Korea’s Kospi rose 0.4 per cent.
Additional reporting by William Langley in Hong Kong
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