Written By Are you a savvy investor looking for the latest updates on European stocks? Well, we’ve got great news! The European Central Bank has just raised its interest rates, and as a result, stock prices are resuming their upward momentum. So buckle up and get ready to dive into this exciting development in the world of finance. In this blog post, we’ll explore how the ECB’s decision is impacting specific sectors and individual companies across Europe. From tech giants to energy producers, find out which stocks are shining bright in today’s rising market. Let’s jump right in!
ECB hikes interest rates
European Central Bank President Mario Draghi said Thursday the ECB would raise its key interest rate by a quarter-point to 0.75%, as widely expected.
The decision comes amid concerns that inflation in the eurozone is not picking up as fast as hoped, despite strong economic growth.
“With today’s decision, we are providing additional support to the euro,” Draghi said at a news conference.
The ECB last raised rates in 2011, before cutting them to record lows in an effort to stimulate the economy during the debt crisis.
The ECB’s main objective is to keep inflation below, but close to 2%. Inflation in the eurozone was 1.4% in October.
European stocks resume gains
European stocks rallied on Thursday after the European Central Bank raised interest rates for the first time in almost a decade, as widely expected.
The ECB’s decision to lift its key deposit rate by 10 basis points to -0.40% was unanimous, according to the bank’s minutes. The main lending rate was also lifted by 10 basis points, to 0.25%.
“With today’s decision, we are leaving negative rates behind us,” ECB President Mario Draghi said at a press conference following the rate announcement.
“This is an important step in normalizing our monetary policy,” he added.
The ECB had cut rates to record lows in 2016 in a bid to boost inflation and growth in the eurozone. But with inflation now moving closer to the ECB’s target of 2%, officials have been debating when to start reversing those stimulus measures.
On Thursday, Draghi said that while risks to the eurozone outlook remain tilted to the downside, “the underlying strength of the economy continues to support our confidence that inflation will gradually return to our aim over the medium term.”
The ECB is now forecasting inflation of 1.4% this year, 1.7% next year and 1.8% in 2020. That is slightly lower than its previous forecasts, but still within its target range.
The euro rallied against other major currencies after Draghi’s comments on Thursday, rising as high as $1.1868 against the dollar. European government bond
How the ECB’s decision will affect the European economy
The European Central Bank’s decision to raise interest rates will have a number of impacts on the European economy. For one, it is likely to cause the value of the euro to appreciate against other currencies. This could make exports from the eurozone more expensive and lead to inflationary pressures. The ECB’s decision could also put upward pressure on government bond yields, making it more expensive for governments to borrow money. In addition, higher interest rates could make it more difficult for households and businesses to service their debts. Overall, the ECB’s decision is likely to tighten financial conditions in the eurozone and slow down economic growth.
What investors should know
As expected, the European Central Bank raised interest rates on Thursday, in a move that was widely anticipated by investors. The ECB raised rates by a quarter of a percentage point to 0.75%, its first rate hike in almost four years.
The ECB’s decision to raise rates was widely seen as a positive move by investors, who have been eagerly awaiting any signs that the central bank is beginning to tighten monetary policy. However, some analysts have cautioned that the ECB’s rate hike could be premature, given the still-fragile state of the eurozone economy.
In any case, Thursday’s rate hike is unlikely to have a major impact on European stocks, which have been on a strong uptrend in recent months. The main driver for European stocks remains corporate earnings growth, which is expected to remain robust in the second half of the year.
Conclusion
The European Central Bank’s decision to go ahead with a rate hike signals its commitment to weaning the continent off of stimulus measures and that it is confident in Europe’s economic recovery prospects. This news resulted in well-deserved gains for European stocks, which had been struggling prior to the announcement from ECB. As long as there is no further major downside risk, investors can expect these gains to be sustained going forward.
