FTSE and European markets advance after Federal Reserve rate hike

The FTSE rose in London on Thursday. Photo: Rasid Necati Aslim/Anadolu Agency via Getty

European stock markets opened stronger on Thursday thanks to risk-on sentiment across global markets after the Federal Reserve suggested that the pace of rate increases could slow down in the months ahead.

In London, the FTSE 100 (^FTSE) rose 0.3% after opening, while the CAC (^FCHI) gained 0.6% in Paris, and the DAX (^GDAXI) was 0.4% higher in Frankfurt.

It also comes amid another bumper day for earnings results in both London and on Wall Street.

Across the pond, S&P 500 futures (ES=F) were down 0.2%, Dow futures (YM=F) shed 0.1%, and Nasdaq futures (NQ=F) were 0.5% lower as trade began in Europe.

It came as the US Federal Reserve raised rates 75 basis points as widely expected, but did note some softening in recent data. It was the second 0.75 percentage-point rise in a row.

“The Powell press conference appeared to raise more questions than answers, which may well have been the intention, but also muddied the waters about the Fed’s ambition when it comes to combating inflation,” Michael Hewson of CMC Markets said.

“While keeping the market guessing on where monetary policy is set to go next gives the central bank wriggle room if they feel the need to slow the pace of rate rises in the coming months, the ambiguity could also make its inflation fighting job harder.

“By acknowledging that spending and production in the economy had softened in recent weeks, and that consumer spending had gone the same way, Powell may have been laying the groundwork for a possible slowdown in the pace of rate rises, without actually saying so outright.”

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Fed chair Jerome Powell’s comments lead to a surge in the Nasdaq which closed up by more than 4%.

Traders will now have their focus on US second quarter GDP and jobs data later today. Some analysts predict US economic activity fell for the second quarter in a row, which would be a technical recession.

Meanwhile, weekly jobless claims have also been rising in the past few weeks, climbing to 250,000 last week. They are expected to remain steady at 250,000.

Asian shares were mixed overnight as investors worried about a possible slowdown in the pace of US interest rate hikes, comforting bond markets and sending the dollar to a three-week low on the yen.

In Japan, the Nikkei (^N225) rose 0.4% while the Hang Seng (^HSI) fell 0.2% Hong Kong, and the Shanghai Composite (000001.SS) climbed 0.2% on the day.

Watch: How does inflation affect interest rates?

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