On Thursday, European stock markets experienced an upward atmosphere as investors digested both the interest rate decision by the European Central Bank (ECB) and a major inflation report from the latest U.S. inflation data. The pan-European Stoxx 600 index provisionally ended the session up 0.51%, thus setting it up for a weekly gain.
Automobile stocks recovered from early losses to close up 1.27%, with Stellantis leading gains after a strong afternoon rally, closing up 9.18%. The CEO told Reuters the company is planning to bring back models such as the Jeep Cherokee and 8-cylinder RAM trucks to help cash flow recovery after recent sales struggles.
After the ECB decided the rates to keep rates on hold, the euro appreciated 0.3% against the U.S. dollar move largely anticipated by traders. Investors had the latest US inflation numbers to digest as well, signaling that consumer prices rose in accordance with expectations to show a year-on-year growth of 2.9% in August. European stocks show a calm after the political selloff in France. The monthly display showed a slight rise of 0.4%, compared with a Dow Jones forecast of just 0.3%, whilst the data also revealed unexpected increases in weekly jobless claims.
Following the latest US inflation data release, market bets on any rate-cut move by the Fed wrought little in the way of change: the CME’s FedWatch shows roughly a 90% chance of a quarter-point cut, with the remaining 10% being given to a half-point cut. Further, U.S. stock markets opened on a positive note on Thursday.
The analysts were divided on the chances of the ECB implementing another rate cut this year, now that it had cut its key rate from 3% to 2% in 2025. ECB’s own assessment remains broadly unchanged, in its latest staff macroeconomic projections, expecting headline inflation of 2.1% on average in 2025 and 1.7% in 2026. According to Yael Selfin, KPMG’s chief economist, the central bank had kept the door open for another cut this year due to risks in the growth outlook.
