On Thursday, shares of leading companies in the Eurozone rose to their highest levels in over 15 years as investors anticipate that the European Central Bank is nearing the end of its interest rate hike cycle. The Euro Stoxx 50 index increased by 2.3%, marking its highest level since December 2007, while the Stoxx 600 index for all of Europe rose by 1.4% to its highest level in 17 months. The European Central Bank raised interest rates by 25 basis points, reaching their highest level in more than two decades, and removed the signal indicating the need to keep rates at a level that quickly reduces inflation.
This increased the likelihood of a pause in rate hikes next month, with traders now seeing a roughly 38% chance of a 25 basis point increase in September compared to a 44% chance prior to the latest interest rate announcement. The ECB's decision follows the U.S. Federal Reserve's increase of interest rates by a quarter point on Wednesday, which also spurred bets on the end of the U.S. tightening cycle.
In a day full of earnings, Nestlé's shares rose by 2.6% after the world’s largest packaged food company raised its full-year organic sales forecasts. Shares of BNP Paribas, the largest bank in the Eurozone, increased by 3.0% after surpassing analysts' forecasts for net income in the second quarter.
The Stoxx 600 index may achieve gains for the second consecutive month, as expectations for an end to interest rate hikes and signs of strength in the U.S. economy bolster hopes of easing concerns over a slowdown in the Eurozone economy. The Spanish stock market rose close to its highest levels in three years, while the Italian stock market reached its highest level since 2008.
Shares of Xtron Electronics jumped by 13.2% after the chip systems manufacturer raised its annual forecasts, and STMicroelectronics’ shares gained 8.9% supported by optimistic sales forecasts for the third quarter. This rise pushed the European technology sector index up by 4.4%.
Meanwhile, Airbus shares fell by 1.6% after the aircraft manufacturer failed to reaffirm its near-term production targets, while Volkswagen's shares dropped by 2.1% after the German auto manufacturer cut its delivery forecasts for 2023. British financial stocks slowed down, with Barclays shares declining by 5.3% after warning of increasing pressure on its UK business.
