By Salma El-Sakka
European stocks rallied Thursday after the European Central Bank and Federal Reserve left interest rates unchanged, while investors weighed corporate earnings and geopolitical developments.
ECB Holds Rates, Lagarde to Step Down
The ECB maintained its deposit facility rate at 2.50%, the main refinancing operations rate at 2.65% and the marginal lending facility rate at 2.90%. The central bank warned that rising energy prices could push inflation higher while weighing on economic growth. Hours after the decision, ECB President Christine Lagarde announced she would step down on February 7, 2027, eight months before her term expires, setting the stage for a leadership contest. JPMorgan analyst Greg Fuzesi said a rate hike in December remains very likely.
Fed Keeps Rates Steady Despite Inflation
The Federal Reserve also left interest rates on hold Wednesday. Chairman Kevin Warsh reaffirmed his commitment to price stability, calling the decision the "right policy decision for this moment." The personal consumption expenditures price index rose 3.6% in September, accelerating from 3.4% in August, while core PCE picked up to 3.1%. Morgan Stanley expects two more 25 basis point hikes in December and March.
Currency and Bond Movements
The euro firmed to 1.1162 dollars from 1.1148 dollars. The dollar fell to 157.85 yen from 158.23 yen. Sterling rose to 1.3369 dollars and 1.1977 euros. The yield on the US 10-year Treasury eased to 5.00% from 5.03%, while the 30-year yield held at 5.33%.
US Markets Lower, Alphabet Slumps
In New York, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all declined. Google owner Alphabet fell 12% after disappointing earnings, with investors citing a sharp drop in free cash flow and slowing search growth amid AI competition.
European Markets Gain
London's FTSE 100 closed up 0.3% at 10,722.07. The FTSE 250 rose 0.1% and the AIM all-share advanced 0.3%. Paris's CAC 40 gained 1.1% and Frankfurt's DAX 40 climbed 1.3%.
Corporate Earnings Drive Moves
WPP rose 5.4% after reiterating annual guidance. Shell gained 2.1% on better-than-expected third-quarter results and increased share buybacks. Haleon slumped 15% after lowering full-year revenue guidance following a weaker quarter.
Oil Eases on Diplomatic Hopes
Brent crude fell to $113.75 a barrel from $116.37 amid reports of renewed diplomatic efforts between the US and Iran. US Vice President JD Vance contacted Iran's security chief to revive peace talks.
FTSE 100 Movers and Calendar
Top risers included WPP, 3i Group, London Stock Exchange Group, ICG and Melrose Industries. Biggest fallers were Haleon, Lloyds Banking Group, St James's Place, Rio Tinto and Diageo. Friday brings earnings from NatWest, BP and AstraZeneca, plus rate decisions in Japan and inflation data in France and Germany.
