Rate Cut Hope Lifts European Markets and Extends Weekly Gains Above 3%

Bridgette Randall
10 May, 2024
Frankfurt

European markets advanced and extended further into record territory in the hopes that the major central banks are more likely to cut rates this summer. 

Benchmark indexes in Paris, London, and Frankfurt inched higher and extended their weekly gains as traders estimated major central banks are ready to cut rates as early as June, after the cooler U.S. jobs report and dovish guidance from the Bank of England. 

The U.K. GDP advanced 0.6% in the first quarter, higher than estimated by the Bank of England. 

The GDP rose at a faster pace than in the previous quarter, when the economy shrank by 0.3%, the Office for National Statistics reported Friday. 

With the latest increase, the UK economy ended its technical recession after shrinking to 0.1% in the third quarter and 0.3% in the fourth quarter of 2023. 

On an annual basis, the U.K. GDP expanded at a slower pace of 0.2%. 

On Thursday, the Bank of England held its key lending rate at a 16-year high for the sixth time in a row at 5.25% and hinted that a rate cut is likely if incoming inflation data warrants the move. 

The U.S. weekly jobless claims rose above 200,000 to the highest level since August 2023, indicating that the job market is moderating and providing additional room for the central bank to lower rates. 

 

Europe Indexes and Yields

For the week, the DAX rose 4.3%, the CAC advanced 3.2%, and the FTSE 100 index gained 3.4%. 

In Friday's trading, the DAX index increased by 0.5% to 18,771.51; the CAC-40 index rose by 0.7% to 8,218.26; and the FTSE 100 index inched higher by 0.8% to a new intraday record of 8,447.45. 

The yield on 10-year German bonds edged down to 2.48%; French bonds inched lower to 2.98%; the UK gilts edged lower to 4.12%; and Italian bonds inched higher to 3.81%.

The euro edged higher to $1.077; the British pound inched higher to $1.252; and the U.S. dollar edged higher to 90.69 Swiss cents.

Brent crude increased $0.43 to $84.31 a barrel, and the Dutch TTF natural gas fell by €0.61 to €30.35 per MWh.

 

Europe Stock Movers

Resource stocks advanced after copper, iron ore, gold, and silver prices edged higher in the hopes of demand recovery in China. 

Anglo American, Glencore, and Antofagasta advanced between 1% and 2%. 

Energy explorers advanced in trading after Brent crude oil prices advanced to one-week highs. 

CRH PLC soared 4.7% to 6,710.0 pence after the building materials provider reaffirmed its annual outlook. 

Cairn Homes PLC gained 3.9% to 146.60 pence after the Irish home builder said demand for homes across price ranges and types remains "exceptionally high."