European stocks rose on Thursday as markets steadied after falling the previous day when traders lowered their expectations for major central banks to start cutting interest rates soon.
A combination of higher-than-expected UK inflation data and U.S. retail sales data, as well as hawkish comments from European Central Bank officials, pushed European and U.S. stocks lower on Wednesday, as traders scaled back their expectations for rate cuts.
But European stocks indexes rose on Thursday, as markets steadied.
At 1248 GMT, the pan-European STOXX 600 was up 0.6 per cent on the day (.STOXX), opens new tab, while Germany’s DAX was up 0.7 per cent (.GDAXI), opens new tab.
London’s FTSE 100 was up 0.3 per cent, recovering from a seven-week low hit on Wednesday (.FTSE), opens new tab.
U.S. Treasury yields, which were pushed higher by Wednesday’s change in expectations, edged back down on Thursday. The U.S. 2-year yield was at 4.3312 per cent , compared to Wednesday’s peak of 4.376 per cent.
Wall Street futures were mixed, with Nasdaq e-minis up 0.9 per cent and S&P 500 e-minis up 0.4 per cent , but Dow Jones futures down 0.2 per cent on the day .
Tim Graf, head of macro strategy for EMEA at State Street Global Markets, said that there is “probably still a little bit more to go”, in terms of markets reducing their expectations for imminent rate cuts.
“I think that means higher front-end rates and maybe a little bit of a stronger dollar but you’re kind of two-thirds of the way there, I would say,” he said.
During Asian trading, fears about China’s economy led to China’s blue-chip stocks index hitting its lowest in five years (.CSI300), opens new tab, and the Shanghai Composite Index fell to its lowest since April 2020 (.SSEC), opens new tab. Both recovered over the course of the session.
China’s economic recovery from COVID has been shakier than many investors expected, with a deepening property crisis, mounting deflationary risks and tepid demand casting a pall over the outlook for this year.
The U.S. dollar index was steady at 103.36, having climbed 2 per cent so far in 2024 as investors revised previous expectations that the U.S. Federal Reserve could cut rates as early as March .
The euro was down 0.1 per cent on the day, at $1.08765 .
Euro zone government bond yields were steady, with the benchmark 10-year German yield up one basis point at 2.28 per cent .
Oil prices were steady, helped by OPEC forecasting relatively strong growth in global oil demand over the next two years, although analysts said that was partly offset by an unexpected build-up in U.S. crude stockpiles and China’s struggling economic recovery. The International Energy Agency (IEA) made an upward revision to its 2024 oil demand growth forecast.
Brent crude futures were down 0.1 per cent at $77.81 a barrel , while U.S. West Texas Intermediate crude futures were up 0.1 per cent at $72.63 .
In the latest rise in geopolitical tensions, Pakistan conducted strikes inside Iran on Thursday, targeting separatist militants, the Pakistani foreign ministry said, two days after Tehran said it attacked Israel-linked militant bases inside Pakistani territory.
State Street Global Markets’ Graf said the conflict had not affected broader financial markets.