European shares jump 1% after ECB rate decision

European shares rose on Thursday as the European Central Bank (ECB) signalled cooling inflation and kept interest rates steady, while Novo Nordisk hit a record high following a strong experimental obesity drug update.

The pan-European Stoxx 600 extended gains and hit a fresh record high, rising 1 per cent, with rate-sensitive technology and real estate stocks climbing.

Euro area bond yields also fell, aiding equities, with markets pricing in more than 100 basis points of rate cuts in 2024 from 92 bps before the policy decision.

The ECB kept borrowing costs at record highs, but took a first, small step towards lowering them, saying inflation was easing faster than it anticipated only a few months ago.

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“The markets have reacted quite quickly to the softer growth and inflation outlook which the latest ECB forecasts have delivered,” said Stuart Cole, chief economist at Equiti Capital.

Dublin

PTSB slumped by 12 per cent to €1.40 despite reporting a surge in operating profit and signalling it will return to paying dividends for the first time since the onset of the financial crisis. The lender’s profit soared to €164 million, up from €14 million the previous year, driven by the acquisition of loans from Ulster Bank and a spike in interest rates. However, shares in the bank fell sharply as investors mulled its outlook for this year, which points to a sharp decline in underlying profits as the bank ups investment.

Rivals AIB and Bank of Ireland fell by 3.6 per cent and by 0.2 per cent respectively on the back of a weak day for financials across Europe in the wake of the ECB’s rate decision and commentary. Homebuilder Cairn was down 2 per cent despite reporting record revenue and profits last week. Kerry, Glanbia and Smurfit Kappa were also gainers.

Europe

Novo Nordisk jumped 7.1 per cent after early trial data for its much-anticipated experimental obesity drug amycretin showed a higher weight loss compared with its popular Wegovy treatment.

The broader healthcare sector led sectoral gains with a 2.2 per cent rise to a near two-year high, with Denmark-based Zealand Pharma jumping 10.2 per cent after BTIG initiated coverage with a “buy” rating.

France’s Teleperformance slumped 19.6 per cent after the call-centre operator forecast limited 2024 growth after missing full-year revenue target.

German fashion house Hugo Boss dropped 11.7 per cent after warning of much slower sales growth this year and forecasting profit below estimates.

London

British midcap stocks rose to fresh three-month highs on Thursday as lender Virgin Money soared on a possible buyout, while pest control firm Rentokil lifted blue-chip shares following a profit jump.

Shares of Virgin Money UK rallied 35 per cent, their biggest percentage gain on record, after Nationwide Building Society agreed to buy the bank in a potential £2.9 billion deal to create the country’s second-largest savings and mortgage provider.

The offer represented a premium of 38 per cent to Virgin Money’s Wednesday close.

“Nationwide is effectively pouncing on Virgin Money at a time when prospects are improving for its industry, albeit we’re still in a volatile period until the base rate starts to come down,” said Russ Mould, investment director at AJ Bell.

New York

Wall Street’s main indexes climbed on Thursday, with the Nasdaq leading the charge supported by chipmakers, while the benchmark S&P 500 hit an intraday record high as investors remained upbeat about the prospects of the Fed’s interest rate cut in June.

The Philadelphia Semiconductor index hit a fresh record high and was last up 3.2 per cent, with Qualcomm leading chipmakers’ rally.

Most megacap growth and technology stocks also advanced, with Meta and AI darling Nvidia up 2.7 per cent and 3.4 per cent, respectively.

Federal Reserve chair Jerome Powell said on Thursday the US central bank is “not far” from getting enough confidence that inflation is heading to the Fed’s 2 per cent goal to be able to start interest-rate cuts.

This followed his appearance before the house financial services committee on Wednesday at which the Fed chair said interest rate cuts are still likely in the coming months, while also repeating that ongoing progress in lowering inflation was “not assured.”

The comments kept alive investors’ expectations of a rate cut in June, giving a boost to US equities which had faltered in the days leading up to the testimony. – Additional reporting: Reuters

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