European stocks surge amid ECB rate cut speculation

European equities gained as a policy maker hinted at potential interest rate cuts in the euro area this year.

The STOXX Europe 600 index opened with a 0.4 per cent increase, driven by the tech sector’s recovery, particularly boosted by Nvidia Corp.’s rebound, which also lifted the S&P 500 on Tuesday.

Deutsche Post AG surged more than 3 per cent following a robust profit forecast from US peer FedEx Corp.

With limited economic data from the eurozone on Wednesday, traders focused on policy signals. According to Governing Council member Olli Rehn, investor expectations for the European Central Bank (ECB) to lower rates twice as much this year are justified. Rehn emphasised the need to balance inflation management with economic stimulus.

The ECB recently initiated rate cuts after a series of hikes aimed at curbing the eurozone’s severe inflation. Despite uncertainties surrounding future policy decisions, influenced by recent consumer price increases, wage gains, and geopolitical tensions, most officials remain cautious.

In the US, equity futures showed upward movement, indicating continued momentum from a tech-driven rally bolstered by Nvidia’s 7 per cent surge. The 10-year Treasury yield stabilised around 4.26 per cent, and the dollar index remained steady.

Later in the day, the US planned to auction $70 billion of five-year notes following a successful sale of two-year Treasury bonds.

Asian markets also showed mixed results, with Japanese and Hong Kong stocks rising while Australian equities declined. Australia’s dollar and bond yields increased after strong inflation data suggested persistent price pressures, potentially prompting the central bank to resume rate hikes.

Meanwhile, concerns over China’s economic slowdown led to a historic low in its 10-year bond yield as investors sought refuge in fixed-income assets amid expectations of further economic stimulus.

In commodity markets, oil prices advanced ahead of a key US government report on crude inventories and fuel demand, following mixed industry data releases.

Copper prices, however, fell to their lowest point in over two months due to subdued demand from China. Gold prices remained stable amid market fluctuations.

The yen hovered just below 160 per dollar, a critical threshold that could trigger intervention concerns if breached.

Attribution: Bloomberg.