European stock markets close higher, with US GDP and interest rate expectations

European stock markets closed higher this Thursday (26) in recovery after Wednesday’s losses, on a day with an empty agenda in the region and with investors waiting for the next interest rate decision by the European Central Bank (ECB) and the Bank of England (BoE). Still, the above-expected US Gross Domestic Product (GDP) also boosted business this session.

In Frankfurt, the DAX index closed up 0.34%, at 15,132.85 points. The CAC 40, in Paris, advanced 0.74%, to 7,095.99 points, and the FTSE MIB, in Milan, closed up 1.32%, to 26,217.56 points. In Madrid, the Ibex 35 index rose 0.79% to 9,028.10 points. Finally, on the Lisbon Stock Exchange, the PSI 20 rose 1.07% to 5,961.77 points. Quotes are preliminary.

In London, the FTSE 100 rose 0.21% to 7,761.11 points, despite the fall of Polymetal, which plunged more than 20%, extending Wednesday’s losses, with investors still reacting to the possibility of the company migrating the Kazakhstan listing.

On the Frankfurt Stock Exchange, the German software company SAP lost almost 1%, with the market reacting to the news that the company will cut about 3,000 jobs after presenting a disappointing balance sheet for the fourth quarter of 2022.

In the wake of Wall Street, European equity markets also benefited from higher-than-expected US GDP, indicating resilience in the US economy, which also benefits Europe, increasing risk appetite.

In the view of Capital Economics, investors also remain attentive to any sign that indicates the ECB’s interest rate decision for the meetings that follow next week’s, since the market has already entered into a consensus that the next high will be 50 points -base (bp). “The resilience of the economy and the persistence of core inflation mean that the ECB will raise the deposit rate by a further 50bp in March and 25bp in the following two meetings, taking it to a peak of 3.5%.”

As for the BoE, the consultancy says that a rise of 50 bp at the next meeting, taking interest rates to 4%, will not come as a surprise to the market. However, the projection is that subsequent increases will take the rate to 4.50%, higher than the market forecast of a peak of 4.25%. “We think markets will be surprised at how quickly interest rates will be cut in 2024.”