European Markets Soar to Multi-year Highs Ahead of ECB and BoE Rate Decisions

Bridgette Randall
14 Dec, 2023
Frankfurt

European market indexes soared on Thursday, following a global market advance after the U.S. Federal Reserve held its key lending rate steady and signaled three rate cuts in 2024.

Benchmark indexes in Paris and Frankfurt traded at record highs, and in London they rebounded after the Federal Reserve estimated larger rate cuts in 2024 than previously indicated in September.

The Bank of England and the European Central Bank are scheduled to announce their rate decisions later in the day, and both central banks are widely anticipated to hold rates steady.

Despite the economic slowdown in the eurozone and the UK, central banks are expected to keep interest rates at muti-decade highs in order to bring down inflation. 

Bond yields fell sharply in trading today, and the yield on the German 10-year Bund declined to a low last seen in mid-January, and the yields on French, Italian, and UK bonds eased as well.

 

Switzerland Holds Rates, Norway Hikes  

The Swiss National Bank also left its policy rate unchanged at 1.75%, a second consecutive decision to hold rates in a row, and policymakers said inflation forces are weakening.

Consumer price inflation in Switzerland eased to 1.4% in November, the lowest level since October 2021.

The Norwegian central bank increased its policy rate by 25 basis points to 4.5%. 

Norges Bank Governor Ida Wolden Bache said that rates are likely to remain high "for some time ahead" because inflation is still too high despite the recent economic slowdown.  

 

Europe Indexes and Yield

The DAX index increased 0.7% to 16,893.28, the CAC-40 index rose 0.9% to 7,600.03, and the FTSE 100 index advanced 1.9% to 7,696.55.

The yield on 10-year German bonds decreased to 2.03%; French bonds traded lower to 2.56%; the UK gilts eased to 3.67%; and Italian bonds inched higher to 3.75%.

The euro traded lower to $1.09, the British pound inched lower to $1.265, and the U.S. dollar eased to 86.98 Swiss cents.

Brent crude decreased $1.30 to $75.56 a barrel, and the Dutch TTF natural gas increased by €0.39 to €35.43 per MWh.

 

Europe Stock Movers

Air France KLM soared 6.9% to €13.04 after the international carrier reiterated its outlook for the period between 2024 and 2026 and lifted its operating margin to above 8% for the period between 2026 and 2028.

The airline's debt was rated BBB- with a stable outlook by Fitch and BB+ with a stable outlook by S&P Global Ratings.

Serco Group advanced 3.9% to 161.40 pence after the UK-based outsourcing company estimated 2024 profit to increase to £260 million.

BP plc increased 2.1% to 469.45 pence after the company denied £32.8 million in cash and stock remuneration to former chief executive Bernard Looney.

The board confirmed the immediate termination of the former chief executive after concluding an investigation that found "serious misconduct."

BP said that Looney knowingly misled board members last year when they inquired about allegations regarding his previous relationships with colleagues and assurances about his future behavior.

Looney's remuneration soared to £10 million in 2022 from £4.5 million in 2021.

Vivendi SE increased 7.8% to €9.66 after the media company announced a plan to study the separate entities as independent listed entities: Canal+, Havas, and an investment company.

Evotec SE soared 10% to €20.46 after the biotech company announced a partnership with Charité-Universitätsmedizin Berlin to create a molecular patient database for ANCA-associated vasculitis, a rare autoimmune condition that causes inflammation of blood vessels with various manifestations.