European Markets Extend 4-day Rally, BoE Left Rates Unchanged

Bridgette Randall
02 Nov, 2023
Frankfurt

Benchmark indexes across Europe jumped more than 1% on interest rate optimism after the U.S. Federal Reserve's rate decision.

Popular indexes in Frankfurt, Paris, and London advanced for the fourth day in a row and jumped 1% after the Fed kept its short-term interest rate range unchanged between 5.25% and 5.5%.

The Bank of England kept its key lending rate at a 15-year high of 5.25% and held rates for the second time in a row.

The Monetary Policy Committee, in a 6-3 vote, decided to leave rates unchanged, and the central bank reiterated that rates are likely to remain restrictive for a while until inflation drops to the 2% level.

Market participants bid up stocks in the hope that the central banks are likely to pause rates for a while.

Higher interest rates lower the value of the future earnings stream, especially for high-growth and tech companies where most of the earnings are in the future, and higher short-term rates drive long-term bond yields higher, providing an attractive alternative to stock investing.

On the economic front, Germany's seasonally adjusted jobless rate increased to 5.8% in October from 5.7% in September, the Federal Statistics Office reported Thursday.

Manufacturing surveys across the eurozone showed persistent growth weakness.

HCOB's final eurozone manufacturing Purchasing Managers' Index fell to 43.1 in October from 43.4 in September, S&P Global reported Thursday.

Manufacturing weakness intensified in Italy and Spain due to challenging economic conditions in the currency union.

The manufacturing index in Italy fell to 44.9 in October from 46.8 in September, and in Spain it eased to 45.1 from 47.7 in September, separate reports from S&P Global showed.

 

Europe Indexes and Yields

The DAX index increased 1.5% to 15,145.14, the CAC-40 index advanced 1.6% to 7,042.96, and the FTSE 100 index edged up 1.2% to 7,430.87.

The yield on 10-yetrar German bonds decreased to 2.70%, French bonds traded lower to 3.32%, the UK gilts edged up to 4.41%, and Italian bonds inched lower to 4.48%.

The euro rebounded to $1.062, the British pound at $1.212, and the U.S. dollar at 90.33 Swiss cents.

Brent crude increased $1.19 to $85.84 a barrel, and the Dutch TTF natural gas edged lower by €0.62 to €47.13 per MWh.

 

Europe Stock Movers

BT Group Class A jumped 6.4% to 118.19 pence after the UK-based broadband and mobile services provider reported better-than-expected quarterly results.

Shell plc jumped 2.2% to 2,711.05 pence after the oil company reported a third-quarter profit of $6.2 billion and launched a $3.5 billion stock repurchase plan.

Trainline Plc soared 8.2% to 284.22 pence after an online train travel information provider and ticketing platform reported positive results in the first half.

Net rail ticket sales in the first half increased by 23% to £2.6 billion, following the post-pandemic rebound in travel.

Revenue in the first half increased 19% to £197 million from £165 million, operating profit advanced 36% to £23 million from £17 million, and basic earnings per share rose to 2.9 pence from 2.6 pence a year ago.

The company revised its estimated full-year revenue growth range to between 17% and 22% from the previous range of between 13% and 22%.

The company also tightened its full-year revenue growth range between 15% and 20%, from the previous range between 13% and 22%.

Hikma Pharmaceuticals Plc declined 3.5% to 1,847.0 pence despite the company forecasting core operating margin growth for its generic at the upper end of its previous announced range.

Alstom SA jumped 4.6% to €13.39 after the French-rail service company won an eight-year services contract extension of €950 million from CrossCountry trains, part of Arriva Group, in the United Kingdom.

Schneider Electric SE added 3.5% to €150.22 after the company said it finalized the acquisition of EcoAct SAS, a climate consulting and net zero solutions provider.

Hugo Boss AG increased 5.7% to €58.58 after the fashion apparel company reported positive third-quarter earnings and reiterated its full-year 2023 outlook.