Volkswacht Bodensee - ECB rate cut boosts European stocks as Wall Street extends rally

As the US Federal Reserve is expected to finally cut its own borrowing costs next week, the ECB reduced its key rate by a quarter percentage point again, as expected.

It was the same size as its previous cut in June, which marked the end of a record hiking cycle that began in mid-2022 to tame a surge in consumer prices.

Frankfurt and Paris stocks gave up some of their gains following the ECB announcement, which gave no indication on future rate cuts and was accompanied by a slight reduction in its growth forecasts.

The euro rose against the dollar following the decision.

"The ECB’s message may have been less dovish than expected today, but it did not seem to get through to financial markets on Thursday," said XTB brokerage's research director, Kathleen Brooks.

ECB policymakers "remain focused on inflation, rather than following the Fed by placing less emphasis on inflation and focusing instead on growth."

Brooks added that despite the relatively hawkish tone, markets still believe the ECB will cut rates in October and December, given the bloc's tepid growth.

Back in New York, US stocks finished solidly higher following a poor start as markets eye an expected Fed interset rate cut next week.

US wholesale prices rose by 0.2 percent in August, putting the benchmark on an annual basis at 1.7 percent, down from a revised 2.1 percent last month.

However, when volatile food and energy components were stripped out, wholesale prices rose by 0.3 percent, topping estimates.

The dynamic is similar to Wednesday's consumer price index report, which analysts said kept the Fed on track to cut interest rates next week.

All three major US indices advanced, with the S&P 500 winning 0.8 percent.

"The data helped validate the soft landing argument," said Briefing.com analyst Patrick O'Hare, who noted that investors were also motivated by a "fear of missing out" on gains.

The positive mood on stocks flowed through to Asia on Thursday, where Tokyo led gainers and jumped more than three percent after seven days of losses.

Among individual companies, Moderna plunged 12.4 percent after announcing it will reduce its annual research and development expenses by $1.1 billion starting in 2027.

Wells Fargo dropped 4.0 percent after the Office of the Comptroller of the Currency announced an enforcement action that will require the bank to fix defects in its financial crime risk management and anti-money laundering controls.

- Key figures around 2050 GMT -

New York - Dow: UP 0.6 percent at 41,096.77 (close)

New York - S&P 500: UP 0.8 percent at 5,595.76 (close)

New York - Nasdaq Composite: UP 1.0 percent at 17,569.68 (close)

London - FTSE 100: UP 0.6 percent at 8,240.97 (close)

Paris - CAC 40: UP 0.5 percent at 7,435.07 (close)

Frankfurt - DAX: UP 1.0 percent at 18,518.39 (close)

Tokyo - Nikkei 225: UP 3.4 percent at 36,833.27 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 17,240.39 (close)

Shanghai - Composite: DOWN 0.2 percent at 2,717.12 (close)

Euro/dollar: UP at $1.1078 from $1.1012 on Wednesday

Pound/dollar: UP at $1.3126 from $1.3043

Euro/pound: DOWN at 84.36 pence from 84.42 pence

Dollar/yen: DOWN at 141.78 yen from 142.36 yen

Brent North Sea Crude: UP 1.9 percent at $71.97 per barrel

West Texas Intermediate: UP 2.5 percent at $68.97 per barrel

burs-jmb/bjt

J.Marty--VB