FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019 (2024)

LaToya Harding

·Business Reporter, Yahoo Finance UK

Updated

FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019 (1)

Wall Street was mixed and the FTSE 100 (^FTSE) and European stocks were higher on Thursday as traders digested the latest decision on interest rates from the European Central Bank (ECB). As widely expected, the central bank lowered borrowing costs across the eurozone for the first time in five years.

This takes the ECB’s deposit rate down to 3.75%, from the record high of 4% where it has been since last September. The deposit rate was last cut in 2019, before the ECB began raising interest rates in 2022 and 2023 to fight inflation.

The ECB has also lowered the interest rate on the main refinancing operations, which is the rate banks pay when they borrow money from the ECB for one week, from 4.5% to 4.25%. Its third key interest rate, the marginal lending facility, has been lowered from 4.75% to 4.5%.

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It came as inflation across the eurozone cooled this year to 2.6% in the year to May.

  • London’s benchmark index was 0.4% higher in afternoon trade, with buying interest in the mining sector offsetting some recent weakness across oil and commodity prices in general.

  • Germany's DAX (^GDAXI) advanced 0.4% and the CAC (^FCHI) in Paris headed 0.4% into the green

  • The pan-European STOXX 600 (^STOXX) was up 0.6%

  • Wall Street opened mixed but muted on Thursday, with tech stocks continuing their rally

  • The pound was flat against the US dollar (GBPUSD=X) at 1.2786

  • Darktrace and Vistry promoted to FTSE 100 as Ocado and St James Place crash out

Andrew Kenningham, chief Europe economist at Capital Economics, said: "Any celebrations about today’s 25bp rate cut by the ECB are likely to be muted at best, given that the decision was fully discounted by financial markets and the most recent inflation and wage data have dampened expectations for a rapid easing cycle.

"Moreover, the Bank’s forecasts and statements are slightly hawkish. The ECB has revised up its forecasts for both headline and core inflation slightly for this year and next."

Follow along for live updates throughout the day:

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  • LaToya Harding

    Blog close

    Well that's all from us today — thanks for following along. Be sur to join us again tomorrow for our last markets live blog of the week.

    Have a good evening all!

  • LaToya Harding

    Lululemon rises after earnings beat

    Lululemon (LULU) rose after the bell in New York after beating Wall Street’s earnings and revenue estimates. But it issued weak second-quarter guidance as it contends with a slowdown in the Americas, its largest market.

    The yoga pants maker also raised its share buyback authorisation by $1bn, the second time in six months that the company has increased its returns to shareholders. Shares of Lululemon jumped 10% in pre-market trading.

    The company’s revenue grew by 10% year over year to $2.2bn in the quarter ended April 28, in line with projections. Top-line growth was driven by a 35% revenue increase from international markets — including a nearly 50% increase in China — while in the Americas sales rose by a mere 3%.

    CEO Calvin McDonald touted the “strong momentum” the company is seeing in its international markets and hinted that it needs to do more work in the Americas.

    “We are pleased by the progress we are making to optimise our US product assortment,” said McDonald. “Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver.”

  • LaToya Harding

    The number of Americans filing new claims for jobless support rose last week, to a four-week high of 229,000.

    This was higher than the 219,000 which economists expected.

    Continued claims were also higher at 1792k compared to 1791k.

  • LaToya Harding

    Best UK mortgage deals of the week

    FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019 (2)

    Mortgage rates were virtually unchanged this week, but future homeowners are still struggling to find a decent price and more are taking loans well into retirement.

    The average rate on a two-year fixed deal this week stood at 5.89%, the same as before, while rates for a five-year deal came in at 5.36%, slightly lower than last week's 5.39%, according to figures from Uswitch.

    This follows the Bank of England's (BoE) decision to leave UK interest rates on hold at their 16-year high of 5.25% for a sixth consecutive time.

    With fewer BoE interest-rate cuts now expected in 2024, lenders appear to be leaning towards hiking mortgage rates in the near future.

    Kellie Steed, Uswitch's mortgage expert told Yahoo Finance UK:

    "While the average rates have, again, remained fairly static for the past week, when looking across the whole market there are signs that some high-street lenders are starting to edge rates upwards.

    The average 2 and 5-year fixes have seen a rise this week across the big six lenders, with HSBC having already increased some of its fixed-rate deals. We're also beginning to see multiple smaller lenders begin pulling their higher loan-to-value (LTV) deals, suggesting that they will be repriced shortly."

  • LaToya Harding

    ECB rate cut was not unanimous

    It has been revealed that the ECB decision was not unanimous, with one member opposing the 25 basis point cut.

    Lagarde did not disclose who the dissenter was but said that everyone on the governing council was united that the path was data dependent, and decisions would be taken meeting by meeting.

    There was “absolutely no dissent on that”, she said.

    The euro was almost 0.2% higher against the dollar on the back of all the news.

  • LaToya Harding

    The next few months will continue to be bumpy

    FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019 (3)

    There will be ‘bumps on the road’ in getting inflation back to the 2% target, Lagarde said.

    "The next few months will continue to be bumpy, we know that."

  • LaToya Harding

    Lagarde: Cannot confirm that dialling process is underway

    Despite the cut today, the ECB president said she could not confirm that the eurozone has entered a period of “dialling back” interest rates.

    "Are we today moving into a dialling back phase? I wouldn’t volunteer that because, as I said, we are making a decisions based on the confidence we have that we are on a path.

    But we will need data and more data and analysis of those data to constantly confirm that we are on this disinflationary path.

    We know the destination. We know the direction that we are taking. We know the methodology we will apply. But I cannot confirm that it is the dialling process that is underway.

    "There is a strong likelihood but it will be data dependent."

  • LaToya Harding

    Inflation to fluctuate around current levels this year

    Christine Lagarde has warned that inflation could turn out higher than anticipated if wages or profits rise.

    The European Central Bank president said inflation is likely to fluctuate around current levels this year, adding that market interest rates have risen since the last meeting of the governing council and “credit dynamics remain weak”.

    She said: “Loans to households continued to grow at 0.2% on an annual basis."

  • LaToya Harding

    Press conference begins in Frankfurt

    ECB president Christine Lagarde is now holding a press conference in Frankfurt, discussing today’s interest rates decision.

    Watch the video below or stay tuned for more o

    Coming up in 5 minutes: watch live as President Christine @Lagarde explains the latest monetary policy decisions.

    Watch the ECB press conference https://t.co/Ub3QNhSGjI pic.twitter.com/as6hJ5MgeC

    — European Central Bank (@ecb) June 6, 2024

  • LaToya Harding

    Pressure is on for Bank of England

    The Bank of England (BoE) is now under pressure to align closely with the ECB’s rate action and has its next Monetary Policy Committee meeting in two weeks.

    However prime minister Rishi Sunak’s decision to call a general election for 4 July means the City now expects a rate reduction later in the summer once voting is over. September is now seen as most likely timing.

    But James Smith, developed markets economist at ING, said: “Don’t assume the Bank won’t move in June just because there’s an election coming.

    “BOE independence is a well-established and respected principle among the major parties, and a rate cut has been telegraphed long before the election was called.”

    Meanwhile, Lindsay James, investment strategist at Quilter Investors, said:

    The starting gun has been fired and the European Central Bank is the first out of the major three banks to start cutting rates. This is a significant move given it is the first rate cut from the ECB in five years, and ends what has been one of the most aggressive and swift rate hiking cycles in modern times.

    The ECB has stolen a march on the Bank of England and Federal Reserve – who are both potentially still a few months away from cutting – and will breathe life into an economy that desperately needs some form of stimulus.While this news was well expected, it will no doubt provide relief to consumers and businesses on the continent.

  • LaToya Harding

    ECB ups inflation forecasts

    Also on Thursday, the ECB forecast that headline inflation will average 2.5% in 2024, and then drop to 2.2% in 2025.

    Three months ago, inflation was expected to average at 2.3% in 2024, before falling to the 2% target in 2025.

    Policymakers still expect inflation to drop to 1.9% in 2026.

    🇪🇺 Signs of rising core inflation in the Eurozone suggest the #ECB may not make consecutive cuts.
    📈Core HICP
    3M ann. growth 3.4% (prev. 3.4%)
    6M ann. growth 3.5% (prev. 2.7%)
    12M growth 2.9% (prev. 2.7%)
    🔗Customize the chart: https://t.co/KfRFZcJ9q5 #MM pic.twitter.com/vqsZIrVdoQ

    — MacroMicro (@MacroMicroMe) June 6, 2024

  • LaToya Harding

    A cut after nine months of holding

    In a statement the ECB said:

    "The Governing Council today decided to lower the three key ECB interest rates by 25 basis points.

    "Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady."

    This takes the ECB’s deposit rate down to 3.75%, from the record high of 4% where it has been pegged since last September. The deposit rate was last cut in 2019, before the ECB began raising interest rates in 2022 and 2023 to fight inflation.

    The ECB has also lowered the interest rate on the main refinancing operations, which is the rate banks pay when they borrow money from the ECB for one week, from 4.5% to 4.25.

    Its third key interest rate, the marginal lending facility, has been lowered from 4.75% to 4.5%.

  • LaToya Harding

    BREAKING: ECB cuts interest rates to 3.75%

    The European Central Bank (ECB) has cut interest rates, by a quarter-point, for the first time in five years at its governing council meeting in Frankfurt.

    As widely expected, borrowing costs across the eurozone have been lowered from record highs of 4% to 3.75%, with the ECB joining the central banks of Canada, Sweden and Switzerland in cutting rates — moving well ahead of the influential US Federal Reserve.

    Earlier today, money markets pointed to a 92% probability of a rate cut, with just an 8% chance of no change. It is the first rate cut since September 2019.

    This comes as the bank has made progress in its battle against high inflation across the eurozone, which has cooled from more than 10% in late 2022 to 2.6% in the year to May. This is now sitting just above the 2% target at its lowest point since July 2021.

  • LaToya Harding

    Wall Street to open mixed

    US futures were mixed ahead of an expected interest rate cut by the European Central Bank.

    The S&P 500 was flat in premarket trading, while the Dow Jones Industrial Average was slightly lower. Nasdaq futures were up however, as AI-chip giant Nvidia boosted optimism around the tech sector.

    It comes as a tech rally on Wednesday drove the S&P 500 and the Nasdaq to all-time highs.

  • LaToya Harding

    UK firms plan lower pay rises

    UK firms are set to hike wages at a slower pace this year, according to the Bank of England's latest ‘Decision Maker Panel’ (DMP) survey.

    Companies expect wage growth to be 4.5% in the year ahead, below the annual wage growth of 6.0% in the three months to May.

    The DMP survey also found that:

    • Businesses expect their output price inflation to decline over the next year. Year-ahead own-price inflation was expected to be 3.9% in the three months to May, down from 4.0% in the three months to April.

    • Firms reported annual employment growth of 1.5% in the three months to May, lower than the 1.7% reported in the three months to April.

    • Firms reported that the average interest rate that they were paying on their borrowing (both bank and market based) was 6.6% in May, 0.4 percentage points lower than reported in April.

  • LaToya Harding

    Bitcoin price soars on $100k speculation as ETFs sustain crypto rally

    FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019 (5)

    Bitcoin (BTC-USD) rose over 5% in the past week to a high of $71,240 (£55,739) in early trading on Thursday, after an increase in exchange-traded fund (ETF) inflows.

    Other crypto tokens ether (ETH-USD) and solana (SOL-USD) increased by 3% and 4% respectively in the same period, according to Coingecko data.

    Galaxy Digital CEO and cryptocurrency billionaire, Michael Novogratz, told Bloomberg TV, that bitcoin could sail past $100,000 by the end of this year, if the digital asset's price breaks out above its March all-time high of $73,000 and politicians start looking more favourably towards crypto.

    "If we take out $73,000 in the next week or so, we're gonna end the year at $100,000. Somewhere around there or even higher," Novogratz said on Tuesday. The forecast suggests around a 40% gain from Wednesday's current price.

    Read the full article here

  • LaToya Harding

    US election: Threat to investors amid civil war fears

    The looming US presidential election in November, between incumbent Joe Biden and former president Donald Trump, presents the greatest headwind for investors in 2024, warns the CEO of an independent financial advisory and asset management firm.

    The warning comes as the race for the White House heats up. Biden and Trump are now tied if third-party candidates like Robert F. Kennedy Jr. are on the ballot, according to two recent surveys that show Kennedy is gathering considerable support with independent voters.

    Nigel Green of deVere Group said:

    “The US is currently more divided ideologically and politically than at any time since the 1850s, when tensions boiled over into civil war.

    ​“This deep division, combined with the potential for significant civil unrest, creates a highly volatile environment for investors in the world’s largest economy. Currently, we put the chances of a second American Civil War at around 25%.

    “While this may sound alarmist, the mere consideration of such a possibility highlights the severity of the current political climate and the need for investors to be aware of the risks.

    "Investors are now facing increased risks due to the potential for regulatory changes, shifts in trade policies, and broader economic instability. To mitigate these risks, it’s crucial for investors to consider diversifying their portfolios."

  • LaToya Harding

    UEFA Euro Spending: Consumer spend set to hit £2.75bn

    FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019 (6)

    UK consumer spend set to provide a healthy £2.75bn boost to economy during the Men’s UEFA Euro 2024 tournament kicking off on Friday 14thJune - surpassing the £2bn generated by the 2022 World Cup.

    The Men’s UEFA Euro 2024 Spending Report by VoucherCodes.co.uk, reveals that 35.4 million Brits are predicted to tune into the competition at home, bars, pubs, and restaurants as they get ready to cheer the Three Lions on this summer.

    Other key stats include:

    • 30.7 million people set to watch at least one game from home, spending £2.1bn on retail sales alone

    • Fans are set to spend £613.7m at hospitality venues throughout the tournament, including £396.5m on drinks alone

    • 70.8m is expected to be spent on garden cooking products such as pizza ovens, BBQs, and BBQ accessories and utensils as Brits look to make the most of the summer weather

  • LaToya Harding

    Housebuilding finally out of the deep freeze

    Housebuilding is finally coming out of the deep freeze. While it’s still lagging behind the rest of the construction industry, residential building has inched back into growth territory.

    Michael Wynne, director of the sustainable housebuilder Q New Homes, said:

    “But this is still a thaw rather than a rebound. After months of contraction, housebuilding output is only expanding slowly.

    “Nevertheless the mood among housebuilders is improving, as the headwinds that held back our industry for so long begin to ease.

    “Building cost inflation – which wiped out many smaller players’ profit margins during the dark days of 2023 – continues to soften.

    “And while interest rates remain high, it’s now a question of when, not if, they come down. In time this will make it easier for developers to purchase land and build new homes, and make those homes more affordable for buyers."

  • LaToya Harding

    Eurozone retail sales slump in April

    Retail sales slowed in the eurozone last month with volumes falling 0.5% compared to March. This followed growth of 0.7% over the previous month

    According to the latest figures from Eurostat consumer spending remained subdued despite recent falls in inflation.

    Retail sales volumes was 0.6% lower in the European Union.On an annual basis, sales volumes were flat compared with April 2023, and 0.1% lower in the EU.

    Euro area #RetailTrade down by 0.5% in April 2024 over March 2024, unchanged compared with April 2023 https://t.co/Na55nkfZdi pic.twitter.com/Zbe8qRw3Wc

    — EU_Eurostat (@EU_Eurostat) June 6, 2024

Watch: How does inflation affect interest rates?

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FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019 (2024)

FAQs

FTSE 100: Wall Street mixed and Europe higher as ECB cuts rates for first time since 2019? ›

Wall Street was mixed and the FTSE 100 (^FTSE) and European stocks were higher on Thursday as traders digested the latest decision on interest rates from the European Central Bank (ECB). As widely expected, the central bank lowered borrowing costs across the eurozone for the first time in five years.

When did ECB cut interest rates? ›

ECB Rate Cut Highlights

According to the statement, effective June 12, the interest rates on main refinancing operations, marginal lending facilities, and deposit facilities will each be lowered by 0.25 percentage points.

What is the name of the UK stock index? ›

The FTSE 100 Index (UKX) comprises the 100 most highly capitalised blue-chip companies listed on London Stock Exchange.

What is the historical return of the UK stock market? ›

Over the last 119 years, UK stocks have made annualised returns of +4.9% over and above inflation. Therefore, if you think inflation will be 2.5% on an ongoing basis, you might expect your long-term returns to be around 7.5%.

What is the return rate of FTSE 100? ›

Average returns
PeriodAverage annualised returnTotal return
Last year10.9%10.9%
Last 5 years5.9%33.4%
Last 10 years5.4%69.2%
Last 20 years5.3%183.1%

Why does ECB have 3 interest rates? ›

As their names suggest, the three key ECB rates are monetary policy instruments used by the ECB to have an impact on the granting of loans and to regulate inflation in the Eurozone. The main role of the ECB is not to lend and banks only turn to the ECB when they don't find any liquidity in the interbank market.

What was the negative interest rate in the ECB in 2014? ›

The European Central Bank introduced its negative interest rate policy (NIRP) in June 2014 when it decided to cut for the first time its deposit facility rate below 0%, to -0.1%. Since then, the ECB has cut its deposit rate four more times, each time by 10 basis points, to reach -0.5% in September 2019.

What is the difference between the FTSE 350 and the FTSE 100? ›

What's the difference between the FTSE 100, FTSE 250 and FTSE 350? The main difference is the value of the market capitalisation of companies in each index. The FTSE 100 is about five times larger than the 250 in terms of value, which means that the FTSE 350 is heavily weighted towards the performance of the FTSE 100.

What does FTSE 100 stand for? ›

'FTSE' is short for 'Financial Times Stock Exchange', which is derived from the names of two companies that launched the FTSE – 'Financial Times' and 'London Stock Exchange'. The '100' in 'FTSE 100' represents the number of stocks in the index.

Which country does the FTSE index belong to? ›

The "FTSE" is the Financial Times Stock Exchange in the U.K. that is a provider of different indices, its most popular being the FTSE 100, which tracks the top 100 companies by market cap in the U.K. The U.S. version of this would be the S&P 500, which tracks the top 500 U.S. companies by market cap, or the Dow Jones ...

What are the top 5 FTSE 100 companies in the UK? ›

The top FTSE 100 companies are AstraZeneca, Shell, Linde, HSBC Holdings, Unilever Group, BP, Diageo, Rio Tinto Group, Glencore, British American Tobacco, and GlaxoSmithKline.

What was the last 10 years stock market return? ›

Stock Market Average Yearly Return for the Last 10 Years

The historical average yearly return of the S&P 500 is 12.58% over the last 10 years, as of the end of April 2024. This assumes dividends are reinvested. Adjusted for inflation, the 10-year average stock market return (including dividends) is 9.52%.

What is the oldest stock index in the UK? ›

The oldest UK stock index that is still in use today is actually the FTSE All-Share, which was launched as the FT Actuaries All-Share in 1962. The index was solely run by the Financial Times until January 1984, when the FTSE 100 was launched.

Does FTSE 100 include dividends? ›

Since the turn of the millennium the apparent malaise infecting the UK stock market is “somewhat of a mirage”, says Laith Khalaf, head of investment analysis at AJ Bell, as index comparisons are undermined by the weakness of sterling and the fact dividends are not included in the headline FTSE 100 index.

Is it safe to invest in FTSE 100? ›

FTSE 100 companies are typically stable thanks to their size and reputation – but they're not immune from downturns. So it's always wise to spread your risk. You can buy FTSE 100 shares using InvestDirect, our share dealing platform. Fees and eligibility criteria apply.

What was the FTSE 100 in 1999? ›

As revellers saw in the new millennium on New Year's Eve 1999, the FTSE 100 closed at a then-record high of 6930. The stock market was in the grip of the “dotcom” boom. They were good times for many investors.

What did the ECB do during the 2008 financial crisis? ›

As regards the ECB, in the face of financial crisis, monetary policy was eased significantly through conventional means in late 2008 and early 2009, with key interest rates being reduced significantly. Moreover, non-standard measures, in the form of the ECB's enhanced credit support were introduced.

When did ECB start quantitative easing? ›

Will quantitative easing revive the euro area economy? On 22 January 2015, the European Central Bank (ECB) launched its Expanded Asset Purchase Programme (more commonly known as quantitative easing, or QE) with the aim of reviving the euro area economy.

What is the current interest rate of the ECB? ›

Fixed Rate Tender: 4.25%

Has the Fed lowered interest rates? ›

Interest rates have held steady since July 2023.

The Federal Reserve has decided to hold interest rates steady after its meeting on June 11 and 12, 2024. The federal funds target rate has remained at 5.25% to 5.5% since July 2023. To combat inflation, the rate was raised 11 times between March 2022 and July 2023.

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