After the decision by the European Central Bank (ECB) to lower interest rates, European exchanges observed a surge in share prices. Wall Street observed share prices soaring as well.
At the meeting of the Governing Council of the ECB in Frankfurt, it was decided that the rate on the deposit facility would be reduced by 0.25 percentage points to 3.5%. The deposit facility rate is the interest rate at which the Governing Council of the ECB determines the direction of its monetary policy stance.
The Governing Council of the ECB also decided to lower the main refinancing operations rate by 0.6 percentage points to 3.65% and the rate on the marginal lending facility by 0.6 percentage points to 3.9%. The new rates will take effect on the 18th of September.
At the last meeting of the Governing Council of the ECB in July, rates were unchanged, but before that, at its meeting in June, all three rates were reduced by 0.25 percentage points.
“The ECB’s message today may not have been as lenient as expected, but it did not seem to have been received by financial markets on Thursday,” said Kathleen Brooks, director of research at trading platform XTB.
ECB policymakers remain focused on inflation rather than following the example of the US Federal Reserve, putting less emphasis on inflation and focusing instead on growth, Brooks explained. She added that stock markets still believe the ECB will cut rates in October and December as well.
Meanwhile, stock prices on Wall Street rose on Thursday as the market waited for the Federal Reserve’s interest rate cut next week.
US Dow Jones Industrial Average rose 0.6% to 41 096.77 points on Thursday. Standard & Poor’s 500 index rose by 0.8% to 5 595.76 points, and Nasdaq Composite index went up by 1% to 17 569.58 points.
A positive atmosphere also prevailed on Asian exchanges, where the Tokyo Stock Exchange index “Nikkei 225” rose 3.4% percent to 36 833.27 points.
The London Stock Exchange index FTSE 100 rose 0.6% to 8240.97 points on Thursday, the Paris Stock Exchange index CAC 40 rose 0.5% to 7 435.07 points and the Frankfurt Stock Exchange index DAX rose 1% to 18 518.39 points.
In electronic trading on the New York Stock Exchange, the price of WTI-branded crude oil rose 2.5% to 68.97 USD/barrel on Thursday. The price of Brent crude oil on the London Stock Exchange rose 1.9% to 71.97 dollars per barrel.
On the Dutch exchange Title Transfer Facility (TTF), the price of natural gas fell 2.6% on Thursday to 35.19 EUR/MWh.
The euro appreciated against the US dollar on Thursday from 1.1012 to 1.1078 dollars per euro, the British pound against the US dollar rose from 1.3043 to 1.3126 dollars per pound, and the US dollar against the Japanese yen fell from 142.36 to 141.78 yen per dollar. The euro depreciated against the British pound from 84.42 pence to 84.36 pence per euro.