Stocks across Europe finished mixed on Thursday after the European Central Bank (ECB) delivered a widely anticipated interest rate cut — but coupled it with hawkish messaging that dampened early optimism.
The FTSE 100 index in London managed to eke out a modest gain, closing up 9.75 points, or 0.1%, at 8,811.04, having touched a session high of 8,838.84 earlier in the day. However, mid- and small-cap stocks fared worse, with the FTSE 250 closing down 49.63 points, or 0.2%, at 21,069.38, and the AIM All-Share barely unchanged, up just 0.11 of a point at 754.46.
On the continent, equity markets also reflected the mixed sentiment. The CAC 40 in Paris fell 0.1%, while Germany’s DAX 40 edged up 0.2%, both slipping from stronger positions seen earlier in the session.
The moves came after the ECB cut its three main policy rates by 25 basis points, with the deposit facility now at 2.00%, refinancing operations at 2.15%, and the marginal lending facility at 2.40%. While the cut was expected, the central bank’s tone suggested it is not rushing into a series of further reductions.
ECB President Christine Lagarde, speaking at a press conference, said:
“Victory laps are always nice, but there is always another battle. I think we are getting to the end of a monetary policy cycle that was responding to compounded shocks, including Covid, the war in Ukraine, and the energy crisis.”
Analysts were surprised by the bank’s hawkish tilt. Kathleen Brooks of XTB Research remarked:
“This was a hawkish surprise that the market was not expecting. While another rate cut is still on the cards, the probability of a September move has dropped to 45% from 55% earlier in the week.”
In currency markets, the pound edged up to $1.3596 late Thursday, while the euro climbed to $1.1456. Against the yen, the US dollar strengthened to 143.57, from 142.98 on Wednesday.
ING analysts still anticipate a September cut, barring unexpected shocks:
“Unless trade tensions escalate again, the often mentioned direction of travel for the ECB over the summer is clear: vacation, before cutting rates once more in September.”
Meanwhile, in the US, Wall Street enjoyed a more buoyant mood. At the London market close, the Dow Jones was up 0.3%, the S&P 500 gained 0.4%, and the Nasdaq rose 0.7%. Investors digested reports that President Xi Jinping had spoken with US President Donald Trump, although no details emerged, prompting speculation about potential easing in trade tensions.
In the bond market, the US 10-year Treasury yield inched up to 4.39%, while the 30-year yield dipped slightly to 4.89%.
In London corporate news, Wise surged 6.6% after revealing plans to move its primary listing to a US stock exchange, while retaining a secondary listing in London. Chief executive Kristo Kaarmann said the move aims to unlock strategic and capital benefits.
AJ Bell’s Russ Mould compared the UK stock market to “a boxer determined to keep going in a gruelling fight,” noting that while the FTSE 100 is holding up, the broader market suffers from low IPO activity and a spate of firms listing overseas.
Dr Martens climbed 24% after announcing a pivot to a “consumer-first” strategy and forecasting a return to growth. The bootmaker operates in over 60 countries and plans to better connect with customers across channels.
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Conversely, Wizz Air plummeted 27% after a 94% drop in annual pre-tax profits, attributed to high costs and engine issues that grounded over 40 aircraft.
Elsewhere, Marlowe jumped 6.7% after accepting a £366 million takeover offer from Mitie, which fell 13%. The deal, supported by interim chair Lord Ashcroft, is expected to deliver £30 million in cost synergies.
In commodities, Brent crude firmed to $65.51 a barrel, up from $64.65, while gold slipped to $3,364.84 an ounce, down from $3,374.32.
Top FTSE 100 risers included Antofagasta (+97.50p), Fresnillo (+63.00p), Babcock (+39.00p), Smith & Nephew (+34.50p) and BAT (+106.00p). Notable fallers were Diageo (-85.50p), WPP (-23.80p), Sainsbury’s (-10.00p), Vodafone (-2.38p), and Pershing Square Holdings (-94.00p).
Looking ahead, Friday’s UK corporate calendar includes full-year results from Bango, while globally, investors await the US jobs report, eurozone GDP and retail data, and Canadian employment figures.
