European stock markets pared losses to close nearly flat on Thursday following the European Central Bank’s decision to cut interest rates.
The pan-European Stoxx 600 index provisionally closed 0.1% lower. Regionally, the U.K.’s FTSE 100 was little changed for the session, while Germany’s DAX and France’s CAC 40 fell by 0.5%.
Shares of Siemens Energy popped 10% after it upgraded its fiscal 2025 outlook. French Birkin bag-maker Hermès — which overtook LVMH earlier this week as the world’s largest luxury firm by market capitalization — slipped 3.2% following a narrow sales miss. As widely expected, the European Central Bank trimmed interest rates for the third time this year by 25 basis points amid concerns over the euro zone’s economic growth outlook in a time of uncertainty over global trade and tariffs.
Elsewhere, Asia-Pacific markets mostly rose overnight, breaking ranks with Wall Street which declined sharply on Wednesday after U.S. Federal Reserve Chair Jerome Powell cautioned that the ongoing trade tensions could challenge the central bank’s goals of controlling inflation and spurring growth.
Stocks pare losses after ECB rate cut
European stock markets pared their losses to close nearly flat after the European Central Bank cut interest rates.
The pan-European Stoxx 600 index provisionally closed 0.1% lower. Regionally, the U.K.’s FTSE 100 was little changed for the session, while Germany’s DAX and France’s CAC 40 fell by 0.5%.
— Ganesh Rao
Euro zone bond yields pull back slightly after rate cut
Euro zone bond yields pared gains shortly after the interest rate cut announcement, with Germany’s 10-year yield — the benchmark for the bloc — just below the flatline after earlier gains of more than one basis point.
Yield moves were largely muted following their recent spell of volatility spurred by tariffs. The German 2-year dipped to the flatline from a gain of three basis points. France’s 2-year yield was nearly one basis point higher, slightly below earlier gains, while its 10-year yield also fell flat.
“All else equal, the ECB believes monetary policy will need to be more accommodative than previously expected,” Andrew Kenningham, chief Europe economist at Capital Economics, said in a note.
ECB cuts interest rates by 25 basis points
The ECB on Thursday cut interest rates by 25 basis points, as was widely expected ahead of the decision.
Markets had been pricing in an around 94% chance of such a cut, and an around 6% chance of a bigger, 50 basis point reduction.
This takes the central bank’s deposit facility rate, its key rate, to 2.25% — down from highs of 4% in mid-2023.
— Sophie Kiderlin
Tariffs clear the way for European Central Bank interest rate cut
The European Central Bank is widely expected to trim interest rates for the third time this year as global tariff tensions and uncertainty threaten the euro zone’s economic growth.
As of Wednesday, markets were last pricing in a roughly 94% chance of a quarter-point interest rate cut from the central bank and a close to 6% likelihood of a larger, 50-basis-point reduction according to LSEG data.
A quarter-point cut would take the ECB’s deposit facility rate, its key rate, to 2.25% — down from a high of 4% toward the middle of 2023.
The series of relatively fast-paced interest rate cuts have played out as inflation in the euro area has consistently sat below 3%, recently closing in on the ECB’s 2% target. Regional economic growth has meanwhile been lackluster.
Read the full story here.
— Sophie Kiderlin
Spanish lender Banco Santander has dethroned Swiss giant UBS as continental Europe’s largest bank by market capitalization, as U.S. tariffs ripple through the region’s banking sector.
UBS had a market cap of 79.5 Swiss francs ($97.23 billion) as of the Wednesday close, according to FactSet data, with Banco Santander at 91.3 billion euros ($103.78 billion).
It comes as Santander and UBS’ shares have diverged over recent months, with the Swiss lender shedding 17.2% in the year to date, while Santander has gained nearly 35%.
Read more here.
— Ruxandra Iordache
