European Stocks Close Higher On Rate Cut Hopes

European stocks closed on a firm note on Thursday as investors reacted positively to the European Central Bank’s inflation forecast, and on optimism about interest rate cuts by the Federal Reserve this year.

The ECB decided to leave interest rates unchanged, as widely expected. The ECB expects the eurozone economy to grow 0.6% in 2024, down from an earlier forecast of 0.8%. The central bank expects inflation to be 2.3% this year, down from the previous projection of 2.7%.

Federal Reserve Chairman Jerome Powell told the House Financial Services Committee on Wednesday that he expects interest-rate cuts to come this year. In his testimony before the Senate Banking Committee today, he said interest rate cuts “can and will begin” this year.

Powell noted again that the central bank’s policy-setting committee still isn’t convinced that continued progress toward their 2% inflation objective is “assured,” and that it won’t make sense to cut interest rates until it is confident.

Powell said that the inflation situation has “eased notably” over the past year, and the labor market remains “relatively tight” even as surging immigration has made more workers available.

The pan European Stoxx 600 climbed 0.99%. The U.K.’s FTSE 100 gained 0.17%, Germany’s DAX and France’s CAC 40 surged 0.71% and 0.77%, respectively, while Switzerland’s SMI ended 0.25% up.

Among other markets in Europe, Belgium, Denmark, Finland, Iceland, Ireland, Netherlands, Spain, Sweden and Turkiye closed with sharp to moderate gains.

Austria, Greece, Poland and Portugal drifted lower, while Norway and Russia ended flat.

In the UK market, Rentokil Initial soared more than 16% after the group reported a 45.8% surge in annual revenue. Adjusted operating profit jumped 57% in the year.

Ocado Group, Spirax-Sarco Engineering and Anglo American Plc climbed 4.7 to 5.4%. Croda International, Prudential, Antofagasta, Glencore, DS Smith, Rolls-Royce Holdings, GSK, Centrica, United Utilities and Severn Trent gained 2 to…