STOXX 600 rises after ECB rate decision

The pan-European STOXX 600 index hit an all-time high, closing up 1.1%, with the technology sector rising 2.3% to a December 2000 level

Europe's main index rose on Thursday, when the European Central Bank kept rates unchanged amid signs of slowing inflation and Novo Nordisk hit a record high on encouraging trial data for experimental anti-inflammatory drugs.

The pan-European STOXX 600 index hit an all-time high, closing up 1.1%, with the technology sector rising 2.3% to a December 2000 level. Reflecting upbeat sentiment across major bourses were benchmark indexes in Germany, France, Italy and Spain scaling all-time highs.

Eurozone bond yields fell, with markets expecting rates to fall by more than 100 basis points in 2024, compared to 92 points before the decision. Leaving interest rates unchanged at 4.0%, the ECB tweaked its messaging slightly to reflect falling inflation over the past 1-1/2 years and new, lower economic projections.

Equities responded to the lower inflation projections, but people also wanted to hear (ECB chief Christine) Lagarde say that the ECB was open to cutting rates as early as April, if the data supported, but she was very adamant about the need to wait until June, said Thierry Wizman, global FX and rates strategist at Macquarie.

The ECB significantly reduced the 2024 inflation projection. Symbolically important was the 2025 reduction, which implies that the 2% inflation target will be reached by next year, Wizman said.

Many market participants expect the ECB to begin policy easing among major central banks, with the Federal Reserve widely seen cutting rates in June.

The STOXX 600 has rallied this year, holding on to big gains from 2023, helped by a rebound in expectations of an early rate cut. Tech stocks have been at the forefront of trading as AI euphoria continues.