Europe close: Stoxx 600 hits record high as ECB rate-cut hopes rise

(Sharecast News) - European stocks rose strongly on Thursday with the Stoxx 600 finishing comfortably above the 500 level for the first time ever on the back of dovish comments from the European Central Bank, which lowered its outlook for inflation. The pan-European benchmark index rose 0.99% to a new high of 503.16, with strong gains seen in Paris (+0.7%), Frankfurt (+0.8%) and Madrid (+1.2%) partially offset by smaller rises in London and Milan (both +0.2%).

A positive start on Wall Street was also helping sentiment, after Federal Reserve chair Jerome Powell said in a statement on Wednesday that the central bank would consider "carefully removing" its restrictive stance as long as data keeps moving in the right direction.

This side of the Pond, the ECB, which chose to keep rates steady at a meeting of the Governing Council on Thursday, reduced its forecast for inflation to 2.3% from 2.7% but also cut its projections for economic growth. The ECB said: "Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages."

In the following press conference, ECB president Christine Lagarde said, "We will know a lot more in June", highlighting the importance of wage data due out in the coming months.

Economist Claus Vistesen from Pantheon Macroeconomics said "provided the data do no throw up a massive hawkish surprise over the coming months", it's a "reasonable bet" to expect a rate cut in June.

"Ms. Lagarde's comments on inflation point to cautious optimism by part of the ECB that inflation is now going to converge to 2.0%, despite a consistent reference to still-too-high 'domestic inflation pressures'. Ms. Lagarde noted that the council now sees sign of slowing wage growth and that falling margins are allowing a fall in inflation even as unit labour costs stay high," Vistesen said.

"We think inflation and wage growth will ease further between now and the June meeting, albeit only slightly, which should allow the bank to be more confident, paving the way for a rate cut in tandem with the release of the Q2 staff projections."

Hugo Boss drops

Hugo Boss finished the day down nearly 14% after the fashion company delivered underwhelming sales guidance for 2024 and said it could potentially miss its 2025 targets (set in 2021) due to a challenging macro environment. 2023 results from the brand came in ahead of expectations, with net profit rising 23%.

Shares in Novo Nordisk jumped after the Danish pharmaceutical firm detailed promising trial data for its experimental anti-obesity drug amycretin. The stock was up 8% by the close and hit a record high during the session.

German airline Deutsche Lufthansa was flying lower despite the carrier announcing its first dividend since the pandemic after a surge in profits in 2023, as the company warned about the bottom-line impact from recent labour strikes.

Full-year results at German auto parts manufacturer Continental came in below expectations despite the company hiking its dividend after operating profits rose by nearly a third. What's more, Continental said that passenger car and light commercial vehicle production would be broadly stable, after a 10% increase in 2023, which will keep a lid on tyre-replacement growth, while higher labour costs will weigh on earnings.