Fed rate cut boosts market sentiment, European stock markets approach record highs
The Federal Reserve's interest rate cut boosts market sentiment, with European stock markets nearing record highs. The pan-European STOXX 600 index rose by about 1% to 519.61 points, approaching the record high of 525.05 points in August. Retail stocks performed well, while defensive stocks lagged behind. Market expectations for the Fed to guide the economy to a soft landing have strengthened, despite Powell's warning not to be overly optimistic. Analysts point out that market volatility will remain high in the short term, and low liquidity may lead to price fluctuations. Signs of a slowdown in the European economy have raised concerns about the European Central Bank's policy
According to the VESYNC11 financial APP, boosted by the unexpected rate cut by the Federal Reserve and the market sentiment, European stock markets rose and approached historical highs. Data shows that the pan-European Stoxx 600 index rose by about 1% to 519.61 points during the day, slightly below the record high of 525.05 points in August. Retail stocks performed well, while defensive stocks such as utilities and telecommunications lagged behind.
As European stock markets rose, U.S. stock futures rebounded strongly, and Asian stock markets closed higher. Market expectations for the Federal Reserve to guide the U.S. economy to a soft landing are increasing, although Federal Reserve Chairman Powell warned not to assume that the Fed will continue to cut rates significantly.
Christopher Dembik, Senior Investment Advisor at Pictet Asset Management, stated in a report, "What we can be sure of is that the volatility in the stock market will remain at a very high level in the short term, which may favor price fluctuations given the low liquidity backdrop." He added that if the Fed's 50 basis point rate cut is due to concerns about further economic slowdown, investors may turn bearish on the stock market after the initial rebound.
European stock markets have recovered from the summer sell-off when concerns about a U.S. economic recession disrupted the market. However, signs of economic slowdown across Europe in recent times have heightened concerns that the European Central Bank may find itself lagging behind the situation in a loose monetary policy cycle.
Tikehau Capital's Head of Capital Market Strategy, Raphael Thuin, said, "The risk of policy mistakes always exists, but we will only know later." "To some extent, given the resilience of inflation and the tight labor market, the European Central Bank's hands are tied, despite the ongoing risk of further economic slowdown."
