Global Markets Soar: European Stocks Follow Suit as US Rate Cut Sparks Rally, While UK Bonds Take a Hit
European Stocks Approach Record Highs After Fed Rate Cut
European stocks surged on September 19th, nearing record highs, following a global stock market rally after the Federal Open Market Committee (FOMC) cut interest rates by half a percentage point. This move exceeded many economists’ expectations, sparking optimism in the market.
The Stoxx Europe 600 index rose 1.4% to 521.67, just shy of its highest level of 525.05 in August. The UK’s FTSE 100 index also saw a significant increase, rising about 0.9%. In contrast, the Bank of England left its policy interest rate unchanged, indicating no immediate plans to lower interest rates.
Market sectors sensitive to economic trends, such as mining, auto, and technology stocks, experienced significant gains. Conversely, typically defensive stocks like utilities and communications saw declines.
In European bond markets, the German yield curve twisted and steepened as traders anticipated a rate cut from the European Central Bank following the US rate cut. The market is currently pricing in a 38 basis point interest rate cut by the ECB by the end of the year and a 157 basis point cut by the end of next year.
The UK government bond yield curve has become bear steep, with money markets expecting the Bank of England to cut interest rates by a further 41 basis points this year and 156 basis points by the end of next year.
European Market Overview for September 19th
| Stock | Closing Price | Change from Previous Trading Day |
|---|---|---|
| STOXX European stocks 600 | 521.67 | +7.08 (+1.38%) |
| UK FTSE 100 | 8,328.72 | +75.04 (+0.91%) |
| German DAX | 19,002.38 | +290.89 (+1.55%) |
| French CAC | 7,615.41 | +170.51 (+2.29%) |
Bond Yields for September 19th
| Bond | Latest Yield | Change from Previous Trading Day |
|---|---|---|
| German government bond 2-year | 2.22% | -0.04 |
| German government bond 10-year | 2.20% | +0.01 |
| UK government bond 10-year | 3.89% | +0.04 |