European Markets Advanced After the ECB Lowered Rates by 0.25%

Bridgette Randall
17 Oct, 2024
London

European markets advanced as investors reacted rate decisions from the European Central Bank. 

Benchmark indexes in Paris, London, and Frankfurt rose between 0.5% and 1.2% as investors reviewed the latest update on the Euro Area inflation. 

Consumer price inflation was lowered to an annual rate of 1.7% in September from the previous estimate of 1.8% and fell from 2.2% in August. 

The annual core rate of inflation, which excludes prices of food and energy, eased to 2.7% from 2.8% in August, according to a report by the Eurozone statistical agency, Eurostat. 

As widely expected, the European Central Bank lowered its benchmark rates by 25 basis points, the second time in a row and the third time this year, as policymakers looked for ways to arrest the rapidly deteriorating economic conditions. 

The central bank lowered its deposit facility rate to 3.25%, main refinancing rate to 3.4%, and marginal lending facility rate to 3.65%. 

Crude oil prices continued to slide in international trading amid weakening demand growth expectations from China. 

China's housing minister announced several key measures to revive demand for new homes, but those measures fell short of market expectations. 

China plans to increase its "white list" of approved residential projects eligible for financing and increase lending to 4 trillion yen, or $562 billion. 

Local Chinese authorities in key metropolitan areas relaxed home purchase restrictions, lowered down payments, and provided additional incentives for first-time home buyers. 

Despite the raft of measures, property stocks sold off in Shanghai and Hong Kong on the worry that the proposed stimulus did not go far enough to revive consumer confidence. 

 

Europe Indexes and Yields

The DAX index increased by 0.9% to 19,598.83; the CAC-40 index rose by 1.2% to 7,584.37; and the FTSE 100 index advanced by 0.4% to 8,362.67. 

The yield on 10-year German bonds edged lower to 2.19%, French bonds inched lower to 2.94%, the UK gilts edged down to 4.07%, and Italian bonds decreased to 3.40%.

The euro edged lower to $1.08; the British pound inched higher to $1.30; and the U.S. dollar strengthened to 86.34 Swiss cents.

Brent crude decreased $0.39 to $73.85 a barrel, and the Dutch TTF natural gas fell by €0.18 to €39.40 per MWh. 

 

Europe Stock Movers

Nordea Bank increased 5.5% to €10.97 after the Helsinki-based bank raised its estimate of annual return on equity and announced a new stock buyback plan. 

Pernod Ricard increased 1.9% to €125.80 despite the French wine and spirit maker reporting a decline in sales. 

Sales in the fiscal first quarter declined 8.5% to €2.78 billion, and the negative impact of unfavorable foreign exchange rates was €103 million. 

The company blamed the weakness on a sharp decrease in sales in China because of weak consumer sentiment, inventory adjustments in the U.S., and technical challenges in India. 

Sales in the U.S. declined by 10%, in China plunged by 26%, in Europe fell by 3%, but rose in India by 2%. 

Nokia Oyj declined 4.3% to €3.88 after the Finnish tech company reported a 9% increase in operating profit and reiterated its annual earnings outlook. 

Net sales in the third quarter declined 7% to €4.3 billion from €4.7 billion, net income increased 32% to €175 million from €133 million, and diluted earnings per share rose to 3 cents from 2 cents a year ago.

The company reiterated its full-year operating earnings outlook to range between €2.3 billion and €2.9 billion and free cash flow conversion from operating profit to range between 30% and 60%. 

Nestle SA increased 2.5% to CHF 86.02 despite the Swiss food product maker reporting weaker-than-expected sales. 

Reported sales in the nine-month period declined 2.4% to CHF 67.1 billion from CHF 68.8 billion, driven by the 4.1% negative impact of foreign exchange rates and net divestures by 0.3%. 

The company estimated full-year organic sales growth of 2%, underlying operating profit margin of around 17%, and underlying earnings per share growth in constant currency to be broadly flat.