European markets jump after Fed quashes hawkish bets; Stoxx 600 up 1%

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LONDON — European markets bounced on Thursday, tracking global sentiment after the U.S. Federal Reserve doused speculation about more aggressive monetary tightening.

The pan-European Stoxx 600 index climbed 1% by mid-morning, with tech stocks adding 2.4% to lead gains as most sectors and major bourses entered positive territory. Oil and gas slid 1.3%.

The Fed on Wednesday raised its benchmark interest rate by half a percentage point, its biggest hike in two decades, as it looks to rein in inflation running at a 40-year high. The central bank will also begin reducing its balance sheet in June.

However, Chairman Jerome Powell ruled out more aggressive hikes in future policy meetings, prompting a relief rally on Wall Street as traders began backing the Fed to contain inflation without causing a recession.

Financial markets have become hooked on the drug of cheap money and policymakers are clearly keen not to induce a shock for the economy, by weaning dependents off too rapidly, and that’s reassured investors.
Susannah Streeter
Senior Investment & Markets Analyst, Hargreaves Lansdown

“Relief has rippled through the financial markets as the Federal Reserve seems committed to keep to the path it had mapped out to try and tame roaring inflation,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“Financial markets have become hooked on the drug of cheap money and policymakers are clearly keen not to induce a shock for the economy, by weaning dependents off too rapidly, and that’s reassured investors.”

U.S. stock futures pulled back in early premarket trade on Thursday, after the Dow surged more than 900 points during Wednesday’s regular trading session.

Shares in Asia-Pacific advanced during Thursday trade following the Fed decision, with mainland Chinese stocks leading gains on their return to trade following several days of holidays.

Focus in Europe on Thursday will turn to the Bank of England, which is expected to announce a fourth consecutive interest rate hike to combat soaring prices.

The war in Ukraine also remains on investors’ radar. Russian forces have reportedly renewed their assault on the Azovstal steelworks complex, a last stronghold for Ukrainian fighters in the southern port city of Mariupol.

Meanwhile, the EU has proposed a gradual ban on Russian oil in its sixth round of sanctions against Moscow since the unprovoked invasion of Ukraine.

Corporate earnings continue to guide individual share price action in Europe. Shell, BMW, Leonardo, UniCredit, Intesa Sanpaolo, Banco BPM, Societe Generale, Credit Agricole, AXA, Stellantis, Airbus and Air France KLM were among those reporting before the bell on Thursday.

Airbus shares jumped more than 7% after a strong first-quarter report, while S4 Capital surged more than 12% after the British advertising company announced that its delayed full-year results will be released on Friday.

At the bottom of the European blue chip index, Austrian electricity company Verbund fell 9%.

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