Europe: Stoxx 600 ends higher after ECB’s expected ‘hold’ verdict, defence stock boost
EUROPEAN shares finished higher on Thursday as a rally in defence stocks helped lift the main index, with investors taking in a widely anticipated European Central Bank decision to keep interest rates unchanged.
The pan-European Stoxx 600 ended 0.55 per cent higher at 555.33 points, with the region’s aerospace and defence index hitting an all-time high, up 2.5 per cent.
Defence stocks led index gains as investors weighed ongoing geopolitical tensions in the eastern part of the continent after Poland shot down a suspected Russian drone earlier in the week.
BAE Systems jumped 6.3 per cent, Rheinmetall rose 2.3 per cent and Rolls-Royce advanced 2.1 per cent.
“The more we get these little touch points of continued reminders that there’s ongoing uncertainty, the more investors are simply saying I need to have these defence stocks in my portfolio,” said Daniel Coatsworth, chief investment officer at Moneyfarm.
Meanwhile, the ECB left interest rates unchanged on Thursday as expected but offered no clues about its next move, reiterating that the following decision will be data-dependent.
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The central bank also lowered inflation forecasts to 1.9 per cent in 2027, below the 2.0 per cent projected in June, while core inflation is seen at 1.8 per cent then, both below the 2 per cent target.
Traders curbed their bets on another rate cut, seeing just under a 50 per cent chance of a cut by June 2026, according to ICAP data. Declining bets supported the euro, which was last up about 0.3 per cent against the dollar.
“The ECB appears confident that the economic bloc can withstand the impact of President Trump’s tariffs for some more time, when it decided to hold the deposit rate unchanged at 2 per cent,” said Richard Flax, chief investment officer at Moneyfarm.
Germany’s two-year bond yield, vulnerable to interest rate expectations, was up 4 bps to 1.99 per cent.
The construction and materials sector jumped 1.4 per cent after JPMorgan turned positive on key European building-materials names, upgrading Italy’s Buzzi to “overweight” and keeping Germany’s Heidelberg as its top pick. Buzzi rose 6.7 per cent and Heidelberg added 2.5 per cent.
Leading automaker Stellantis became the top individual gainer for the day, up 9.1 per cent. New CEO Antonio Filosa said the company is reintroducing models, including Jeep Cherokee and 8-cylinder RAM trucks.
The stock lifted the index of automakers by 1.27 per cent.
The French benchmark index CAC 40 climbed 0.8 per cent despite being at the receiving end of political and fiscal uncertainties. Brokerage Citigroup has downgraded the country’s equities to “neutral” from “overweight” ahead of a crucial rating review by Fitch on Friday.
Kering gained 2.4 per cent after the Gucci owner said it will not fully buy Italian fashion brand Valentino until at least 2028, pushing back an expensive deal that has been weighing on the heavily indebted group.
Covestro rose 7.9 per cent after Reuters reported that Abu Dhabi state oil giant ADNOC is readying remedies to address an EU subsidy investigation into its 14.7 billion euro (S$22 billion) bid.
Stateside, investors digested hotter-than-expected US consumer prices data for August, which did little to alter expectations for Federal Reserve interest rate cuts.
Technip Energies rose 4.7 per cent after the energy infrastructure company said it had agreed to buy US-based chemicals group Ecovyst’s Advanced Materials & Catalysts business for US$556 million. REUTERS
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