Banks lead European stocks higher after record ECB rate hike

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  • The ECB proposes a rate hike of 75 basis points
  • European retailers fall the most among sectors
  • Banks lead sector gains in Europe

Sep 8 (Reuters) – European stocks rose on Thursday, driven by gains in bank stocks after the European Central Bank made its biggest ever interest rate hike to tackle inflation, which is hitting a record high. half a century and approaching double digits.

The ECB raised its key rate by 75 basis points, as widely expected, and promised further hikes in a bid to bring inflation back towards the central bank’s medium-term target of 2%.

“We see today’s decision in favor of a bigger step as a signal to markets that the central bank is serious about getting back to its inflation-fighting credentials and that it is ready to accept the costs in terms of lower growth to ensure price stability,” Morgan Stanley said. the economists wrote in a note.

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“September was probably the best time for the ECB to send this signal, given the expected slowdown ahead.”

The pan-European STOXX 600 index (.STOXX) ended a volatile session up 0.5% as banks (.SX7P) gained 2.3% as the ECB scrapped the two-tier system of remunerating excess reserves .

“As rates have moved into positive territory, banks will be making more money on loans,” said Sumit Kendurkar, senior trader at Optiver in Amsterdam.

“Previously the ECB used to compensate them for lending at negative interest rates and now that won’t happen, but at the same time they won’t be penalized for making more money on rates positive, which was very well received by investors.”

The basic resources sector (.SXPP) gained 1.5%, trying to recover from a decline of more than 2% after disappointing trade data from China on Wednesday added to concerns about demand for metals.

The STOXX 600 is down more than 0.4% so far this week and is set to end its fourth week in the red as investors worry about soaring energy prices and a global crisis. cost of living following Russia’s shutdown of gas flow to Europe through a major pipeline.

European retailers (.SXRP) lost 1.6% as Swedish retailer H&M (HMb.ST) and Zara owner Inditex (ITX.MC) fell after US counterpart American Eagle Outfitters Inc (AEO.N) missed second-quarter earnings estimates late. Wednesday. Read more

Associated British Foods (ABF.L) fell 7.6% after warning of lower profits next year as its fashion business Primark struggles with rising costs and soaring prices. inflation hits demand. Read more

Atos (ATOS.PA) fell 15.1% to the bottom of the STOXX 600 index, after Goldman Sachs downgraded the French IT consultancy to “sell”, saying its weak financial profile and low visibility point to a long road to recovery.

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Reporting by Shreyashi Sanyal, Sruthi Shankar, Shashwat Chauhan and Devik Jain in Bengaluru; Editing by Rashmi Aich, Krishna Chandra Eluri and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.

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