(Bloomberg) — Struggling corners of European stock markets, including Swedish real estate stocks and mining companies, soared after the Federal Reserve reversed its steep interest rate hikes.
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The London market was led by real estate and mining stocks, with the Stoxx 600 index up 1.7% by 8:34 a.m. Among sole proprietors, Vivendi SE comes after France’s Vivendi announced it is considering splitting its media and entertainment empire into multiple companies to better leverage the strengths of each division. It skyrocketed.
The Fed kept interest rates on hold ahead of its third meeting on Wednesday, with Chairman Jerome Powell saying policymakers were prepared to resume raising rates if price pressures return, but Powell said next year The Bank announced that it is likely that a series of interest rate cuts will be made.
Following the news, battered real estate stocks soared, with FastiGets AB, Sagax AB and Vonovia SE leading the way. Anglo American, Europe’s worst-performing mining stock in 2023, soared. Orsted and Vestas Wind Systems A/S also soared after this year’s disastrous year.
“What’s going up right now is that we underestimated how quickly the Fed could change course,” said Florian Hierpo, head of macro research at Lombard Odier Asset Management. “All the smaller value stocks are going up right now, reflecting how important their financials are to these stocks.” “This is a recovery trend for the Fed, and unless the Fed reverses course, this trend is likely to continue.”
Banks that have outperformed the market this year have been lagging on the prospect of rate cuts, with Italian and Spanish financial institutions particularly lagging behind.
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Investors are bracing for a decision by the European Central Bank later in the day, with a Bloomberg survey of economists predicting deposit rates will remain unchanged at 4% later today. Markets expect the first rate cut to occur as early as the spring, much sooner than policymakers had hoped. President Christine Lagarde will brief reporters in Frankfurt 30 minutes after the ECB’s announcement. The Bank of England will also announce its interest rate decision on Thursday.
“The ECB tends to be more cautious than the Fed, but after yesterday’s strong message from the Fed, it cannot afford to be too hawkish today. Uncertainty about the path to rate cuts next year has been dispelled.” said Francisco Simon of Europe. Head of Strategy at Santander AM. “We hope the ECB will be constructive, but we caution that the work is not done yet.”
European stocks have risen for the second straight month on optimism about central bank easing. However, the rise in stock prices has pushed the Stoxx 600 relative strength index above 70, a level that is generally considered overbought. The rise in the Euro Stoxx 50 index has been very strong this week, with technical indicators showing that the index is at its most overbought level since 1999.
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European banks moved aggressively on Thursday after the Federal Reserve left interest rates on hold and predicted a series of rate cuts next year, while the European Central Bank and Bank of England decided on interest rates later in the day. there is a possibility.
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–With assistance from Allegra Catelli and Michael Musica.
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