European Stocks Gain as Fed Rate Cut Lifts Sentiment

European equities traded higher on Thursday, supported by a boost in risk appetite after the U.S. Federal Reserve delivered a widely anticipated interest rate cut and hinted at further easing later this year.

Market Performance

At 03:05 ET (07:05 GMT), the DAX index in Germany gained 0.9%, the CAC 40 in France rose 0.6%, while the FTSE 100 in the U.K. edged 0.1% lower. The gains mirrored the positive momentum in Asia, where Japan’s Nikkei 225 hit a fresh record high following the Fed’s policy decision.

Federal Reserve Policy Impact

The Fed reduced its benchmark interest rate by 25 basis points to 4.00–4.25%, marking its first cut since December. Policymakers also projected two further cuts before year-end amid rising concerns about labor market softness. However, Chair Jerome Powell highlighted a “challenging situation” with upside risks to inflation and downside risks to employment, underscoring a cautious stance.

The decision reinforced optimism in equity markets, as lower U.S. rates are expected to stimulate economic activity while maintaining global liquidity.

Focus Shifts to Bank of England

Attention now turns to the Bank of England’s policy meeting later in the day. Unlike the Fed, the BoE is expected to hold rates steady at 4%, following last month’s cut—its fifth since August 2024. Inflation in the U.K. held at 3.8% in August, almost double the central bank’s 2% target, a factor likely preventing further immediate easing.

The Bank of Japan is also set to announce its decision on Friday, with expectations for unchanged policy amid political uncertainty.

Corporate Developments

• Next (LON:NXT) reported a strong rise in first-half profits, with international and online sales offsetting weaker in-store performance.
• Renishaw (LON:RSW) posted record revenue and improved adjusted profit despite uneven demand across segments, maintaining a steady outlook.
• Mars announced plans to invest €1 billion ($1.18 billion) in its EU operations by 2026, aimed at boosting manufacturing, sustainability, and innovation.