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ECB delivers third rate cut amid economic concerns

In Europe, stocks showed moderate gains following the ECB's rate cut. Asian markets traded unevenly, with Chinese stocks buoyed by strong China GDP data. US equities posted modest gains on Thursday, with the Dow Jones and Nasdaq inching up on an initial rally in semiconductor stocks and some strong economic data. The S&P 500 reached another record during the session, but ended flat, while the Nvidia stock briefly climbed to a fresh all-time high. Meanwhile, gold surged to a record high amid geopolitical uncertainties, and US Treasury yields dipped slightly.

Date
Auteur
Alessandro Fezzi, LGT Research Content & Publications
Temps de lecture
5 minutes

Christine Lagarde
© Shutterstock

The European Central Bank (ECB) reduced its key interest rate by 25 basis points to 3.25% on Thursday, marking its third rate cut this year. The decision follows a weakening economic outlook and inflation risks flagged by policymakers. Euro-area inflation fell to 1.7% in September from 2.2% in August, below the ECB's 2% target for the first time in three years. ECB President Christine Lagarde highlighted that the economic activity has been weaker than anticipated, supporting the decision for a modest rate cut.

European stocks ended on a positive note following ECB rate cut

European stock indices closed higher on Thursday. The STOXX Europe 600 edged up 0.8%, with Germany’s DAX advancing 0.8% to 19,583.39 points and France’s CAC 40 also showing gains. The Swiss Market Index rose by 0.9%, bolstered by positive earnings reports.

Asian stocks mixed at the end of the week - China’s GDP growth surpasses forecasts

Stocks in the Asia-Pacific region were trading mixed on Friday. Japan’s Nikkei 225 was trading at the close nearly flat, while Australia’s S&P/ASX 200 declined by 0.9%, reflecting investor caution ahead of key economic data. Mainland China’s CSI 300 was trading up 0.7% and Hong Kong’s Hang Seng index was up 1.5% following Friday’s data release. China reported third-quarter GDP growth of 4.6% year-on-year, slightly above the 4.5% anticipated by economists. This follows a 4.7% increase in the second quarter. Retail sales and industrial production also exceeded expectations, providing a positive outlook for the economy. Beijing has introduced measures to boost growth, aiming to meet its annual target of around 5%.

US equities edge higher amid mostly positive economic evidence

In New York, stocks saw modest gains on Thursday. The Dow Jones Industrial Average closed at 43,239.05 points, rising 0.4%, while the S&P 500 closed flat at 5841.47 points. The Nasdaq-100 managed a 0.1% increase, ending the session at 20,190.42 points. Shares of Nvidia rose more than 3%, briefly tapping a new intraday high of USD 140.89. Nvidia’s intraday record comes after Taiwan Semiconductor Manufacturing Company, the world’s largest chip producer, beat third-quarter earnings estimates and posted a 54% increase in profit.

Meanwhile, US retail sales increased by 0.4% in September compared to the previous month, surpassing economists' forecasts of 0.3%, according to data released by the Commerce Department on Thursday. Excluding volatile auto sales, retail revenues rose by 0.5%, well above the anticipated 0.1%. These figures highlight the strength of consumer spending, a critical driver of the US economy. The USD strengthened following the news.

Initial jobless claims in the US fell by 19,000 to 241,000 last week, as reported by the Labour Department on Thursday. This decrease follows a peak of 260,000 claims the previous week, the highest since June 2023. The decline surpassed economists' expectations of 259,000 claims. The labour market is a key factor in the Federal Reserve's monetary policy decisions, with further interest rate cuts anticipated this year despite recent strong employment and retail data tempering these expectations.

US industrial production decreased by 0.3% in September, surpassing economists' expectations of a 0.2% decline, according to data released by the Federal Reserve on Thursday. The previous month's growth was revised down to 0.3% from an initially reported 0.8%. Additionally, capacity utilisation in the manufacturing sector fell by 0.3 percentage points to 77.5%.

Gold continues its upward trend

The price of gold continued its upward trend at the end of the week, reaching a new record high in the night from Thursday to Friday. The price of a troy ounce broke through the 2700-dollar mark for the first time, reaching almost 2712 dollars at times.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from American Express, Procter & Gamble, and Volvo.

Economic data in focus: UK retail sales (08:00), US building permits (14:30), US housing starts (14:30).

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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