European shares rose on Thursday as traders cheered after an overnight rally on Wall Street and the Bank of England raised interest rates in line with market expectations.
Europe’s region-wide Stoxx 600 was up 0.1 percent, recovering from two straight down days, lifted by a strong healthcare sector performance. France’s Cac index rose 0.3 percent.
Investors were encouraged overnight by US inflation data that came in slightly weaker than expected, fueling traders’ belief that the Federal Reserve may soon halt its rate-tightening campaign.
The tech-heavy Nasdaq Composite rose 1 percent on Wednesday to close at its highest level since June. Low rates increase the appeal of companies that promise long-term growth. Contracts tracking the S&P 500 and the tech-heavy Nasdaq were both flat before the New York open on Thursday.
London’s FTSE 100 was down 0.4 percent after the Bank of England raised its benchmark rate for the 12th straight time by 0.25 percentage points to 4.5 percent, as markets had expected.
“The Bank of England has no choice but to raise its benchmark interest rate again due to high inflation, continued labor market tightness and rate hikes by other major central banks,” said Yael Selfin, chief economist at KPMG UK. Traders expect the rate to peak at 4.75 percent in September.
The pound rose against the dollar after the announcement, paring earlier losses, to trade up 0.3 percent on the day to $1.26.
Meanwhile, uncertainty over the US debt ceiling is casting a shadow over markets after US Treasury Secretary Janet Yellen warned earlier this month that the government could run out of money as soon as June 1.
Former US President Donald Trump urged Republican lawmakers on Wednesday to let the US default on its debt unless Democrats give in to demands for “huge” spending cuts. The yield on the interest rate-sensitive two-year Treasury rose 0.02 percent to 3.91 percent, while the yield on the 10-year note was flat at 3.42 percent.
Asian equities struggled for direction after weak inflation data in China signaled a slowdown in demand, but traders hoped similarly soft US data would support stock market valuations. Chinese consumer price inflation has slowed to its weakest level in two years.
Hong Kong’s Hang Seng index fell 0.2 percent, while Japan’s Topix fell 0.3 percent. China’s CSI 300 rose 0.1 percent and South Korea’s Kospi rose 0.4 percent.
Additional reporting by William Langley in Hong Kong
