European Markets Trade at Record Highs; Switzerland Leads with a First Rate Cut

Bridgette Randall
21 Mar, 2024
Frankfurt

European stock market indexes hovered at multi-year highs as investors reviewed monetary policy decisions from several central banks. 

Benchmark indexes in Germany and France traded at new record intraday highs, and the index in London jumped 1% ahead of the Bank of England's rate decision. 

 

U.S. Federal Reserve Holds Rates Steady, Lifts Growth Estimate

The Federal Reserve held steady its target range between 5.25% and 5.50% for the fifth time in a row and signaled that the central bank is prepared to lower rates by as much as 75 basis points over the rest of the year. 

The policymaker also sharply raised the estimate for the U.S. economy's annual growth to 2.1% from the previous estimate of 1.4% released in December. 

 

Swiss National Bank Cuts Rates by 0.25% 

The Swiss National Bank unexpectedly lowered its key lending rate for the first time in nine years, making it the first major central bank to ease monetary policy. 

The central bank cut its key lending rate by 25 basis points to 1.5%, citing reduced inflationary pressures and an appreciation of the Swiss franc in real terms over the past year. 

The central bank also estimated an annual inflation rate of 1.4% in 2024, 1.2% in 2025, and 1.1% in 2026. 

Despite the low inflation, the economy is expected to struggle, and annual economic growth in 2024 is expected to hover around 1.0%. 

 

Norges Bank Holds Rates Steady at 4.5% 

The Monetary Policy and Financial Stability Committee of Norges Bank decided to keep the policy rate unchanged at 4.5% at its meeting on Thursday.

The central bank reiterated the need to keep rates elevated as inflation is slowing but still too high; the depreciation of the Norwegian krone and high business costs and wage growth are keeping the inflation elevated. 

“The policy rate will likely need to be maintained at the current level for some time ahead in order to bring inflation back to the 2 percent target within a reasonable time horizon," said Governor Ida Wolden Bache.

The central bank projected that inflation is expected to remain elevated over the next six months before moderating in the final quarter of the year, and economic growth is expected to "remain low" in the first half of the year before picking up. 

 

Hybrid Car Market Share Expands In the EU

New car sales advanced for the second month in a row in February in the European Union, driven by strong demand in its four largest markets, especially France and Italy. 

The new car registration increase slowed to 10.1% from 883,608 units a year ago, following a 12.1% rebound in January. 

Passenger car sales rose 13% in France, 12.8% in Italy, 9.9% in Spain, and 5.4% in Germany. 

The market share of hybrid electric cars expanded 2.47% to 28.9%, and battery electric car sales increased 9% with a stable market share of 12%. 

However, diesel car sales contracted 5.1% and its market share eased to 12.9%, and petrol car sales increased 6.1% but its market share fell to 35.5% from 36.9% in the previous month. 

 

Europe Indexes and Yields

The DAX index increased by 0.5% to 18,101.10, the CAC-40 index rose by 0.05% to 8,164.23, and the FTSE 100 index inched higher by 0.9% to 7,809.41.

The yield on 10-year German bonds edged down to 2.39%; French bonds inched lower to 2.83%; the UK gilts edged lower to 4.0%; and Italian bonds inched lower to 3.64%.

The euro edged higher to $1.091, the British pound inched higher to $1.271, and the U.S. dollar held steady at 89.33 Swiss cents.

Brent crude decreased $0.19 to $85.74 a barrel, and the Dutch TTF natural gas fell by €0.54 to €28.20 per MWh.

 

Europe Stock Movers

Volkswagen, Renault, Porsche, and Stellantis advanced between 0.3% and 0.7% after passenger car sales jumped more than 10% in the European Union in February. 

Barclays PLC gained 2.7% to 180.50 pence after the UK-based bank is expected to announce job cuts in the investment banking division as the company looks to reduce costs in underperforming divisions. 

Next plc jumped 5% to 8,943.50 pence after the UK-based apparel retailer reported improved pre-tax income and confirmed its current-year outlook. 

3i Group advanced 5.4% to 2,665.0 pence after the private equity group said its largest portfolio company, the discount retailer Action, reported 2023 net sales increased 28% to €11.32 billion and operating earnings rose 34% to €1.62 billion from a year ago, respectively. 

Virgin Money UK jumped 2.5% to 213.10 pence after the company agreed on purchase terms with the Nationwide Building Society. 

The Nationwide Building Society jumped 1% to £135.73. 

Centamin PLC jumped 4.5% to 110.40 pence after the gold miner reported annual gold production in line with the company estimates. 

Veolia Environnement SA gained 0.6% to €29.25 after the French water works company was selected by the Greater Paris Water Authority to manage its storage and distribution of water for 12 years starting in 2025.