European shares rebound, ECB monitory policy in focus

The pan-continent Stoxx 600 ended 0.1 per cent higher, after reaching a near one-month low intraday, with banks and the energy sector leading the charge, up 0.9 per cent and 0.6 per cent, respectively

European shares staged a recovery after a knee-jerk reaction to a high US inflation reading on Wednesday, with investors turning their focus to the European Central Bank’s (ECB) monetary policy decision on Thursday.

The pan-continent Stoxx 600 ended 0.1 per cent higher, after reaching a near one-month low intraday, with banks and the energy sector leading the charge, up 0.9 per cent and 0.6 per cent, respectively.

Germany and Italy’s benchmark indexes turned positive after dropping into the negative territory, while those of France and Spain came off their day’s lows.

Financial markets are now betting that the Federal Reserve will delay cutting interest rates until September after data showed a higher-than-expected increase in US consumer prices in March.

It is just the initial shock and then kind of optimism coming back in again, wondering, does it make a huge difference?, according to Morningstar’s European market strategist Michael Field, who thought the data likely cemented bets of the European Central Bank reducing rates before the Fed.

Focus now shifts to the European Central Bank’s policy meeting on Thursday, expected to hold rates steady. With both hawks and doves coalescing around a June rate cut, the meeting will likely centre around the bank’s growing confidence that conditions will be in place to reduce rates in June.

For the ECB, it is not just weighing up whether inflation’s resurging, they are also trying to balance not shifting us into recession and not leaving rates too high for too long, Field said.

Technology stocks also bounced back from the red, after the sector led gains in early trade after upbeat quarterly revenue from Taiwan chipmaker TSMC.