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ADVERTISEMENTEuropean stocks have hit their highest level in nearly two years, up 0.5% on the day at 0829 GMT, as traders speculated on potential rate cuts by central banks in 2024.
Bank stocks in the Eurozone (.SX7E) surged to their highest levels since 2018. The FTSE 100 in London (.FTSE) saw a 0.2% increase, Germany’s DAX (.GDAXI) rose by 0.8% while the MSCI World Equity index (.MIWD00000PUS) was steady, down by less than 0.1% on the day.
“There is a feeling that (monetary) easing is coming and it seems like there is more to go in the rally in the short term,” Jan von Gerich, Nordea chief analyst, told Reuters.
“I think there’s a risk to the downside for stocks but the momentum is strong right now.”
Oil prices surged following a naval skirmish in the Red Sea, while mixed economic data restrained Chinese stocks.
The onshore blue-chip index in China (.CSI300) dropped by 1.3%, while Hong Kong’s Hang Seng index (.HSI) saw a 1.5% decline.
China’s manufacturing sector came under pressure from weak demand in 2023, influenced by a property slump, geopolitical factors, and cautious consumer spending, all holding back the post-pandemic recovery.
The U.S. dollar index showed a marginal rise of about 0.1% at 101.44, maintaining stability following a nearly 2% decline last year due to expectations of decreasing U.S. rates.
The U.S. 10-year Treasury yield, which experienced an overall rise in 2023, climbed to 3.9425%.
The euro against the dollar was down around 0.1% at €0.91.
Major central banks, such as the European Central Bank (ECB) and the Bank of England (BoE), have flagged their intention to keep rates at their present levels for the time being, despite hopes of a cut.
In Europe, preliminary inflation data for the eurozone is expected on Friday, highlighted by analysts at RBC Capital Markets as “likely to be the most significant additional data point prior to the January ECB meeting”.
Meanwhile, the leader of energy company E.ON (EONGn.DE) warned that turmoil in the Middle East might cause a significant surge in energy prices.
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