UK's FTSE 100 logs best day since September after slew of rate decisions; Europe stocks hit new record

Bank of England Governor Andrew Bailey on Thursday said market pricing for two or three cuts this year was "reasonable," but added this was not a personal prediction on the timing or number of cuts.

"We've had good news, inflation had come down, it's come down as we expected. But we have still got some way to go, particularly with what I call the more persistent bits of inflation. That's particularly the services element," Bailey told reporters.

"I think we can say, we're on the way."

Bailey added that the central bank did not need inflation to come to target sustainably before it began to cut rates, but needed to be sure it would get there.

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-Jenni Reid

Shaan Raithatha, senior economist at Vanguard, discusses the U.S. interest rate outlook for 2024.

U.S. stocks opened higher on Thursday as Wall Street looked to continue its rally to record highs.

The S&P 500 gained 0.5%, while the Nasdaq Composite jumped 0.9% The Dow Jones Industrial added 128 points, or 0.35%.

— Samantha Subin

Analysts on Thursday described the Bank of England's monetary policy announcement, in which it held interest rates steady, as having a dovish tilt.

Joe Tuckey, head of FX analysis at Argentex group, said that the "doves kept swooping" after figures Wednesday showed U.K. inflation falling more than expected, with two Monetary Policy Committee members abandoning previous votes for another rate hike.

"The recent theme of increased expectations for a June rate cut, rather than August, has been bolstered by this week's news," Tuckey said in a note.

James Smith, developed market economist at ING, noted the central bank's forward guidance was unchanged, supporting markets putting a "relatively small probability" on a May rate cut.

"Remember that April's inflation data, due after the May meeting, will be hugely consequential because this is when a large portion of the services basket is affected by annual contract-linked price rises ... The Bank will have more clarity by June's meeting, and we think this is realistically the first 'live' meeting for a rate cut," Smith said.

— Jenni Reid

Sterling extended losses against the U.S. dollar and the euro Thursday after the Bank of England announced an expected hold in interest rates and hinted at cuts on the horizon.

U.K. stocks jumped and outperformed their European peers, with the FTSE 100 index up 1.5% as the FTSE 250 gained 1%.

"We're not yet at the point where we can cut interest rates, but things are moving in the right direction," Governor Andrew Bailey said in a statement provided to Reuters.

U.K. government bond yields, known as gilts, were sharply lower.

The rate-sensitive 2-year gilt yield fell 11 basis points, while the 10-year gilt yield was down 7 basis points.

— Jenni Reid

Turkey's central bank on Thursday raised its key interest rate, the one-week repo rate, from 45% to 50%, citing the continuing need to counter climbing inflation in the country.

Turkish annual consumer price inflation soared to 67% in February, fueling concerns that Turkey's central bank — which had indicated a month prior that its painful eight-month-long rate-hiking cycle was over — might have to return to tightening.

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— Natasha Turak

Rory McPherson, chief investment officer at Wren Sterling Group, says mid-cap stocks are likely to perform well as central banks move to cut interest rates later this year.

The British pound was slightly lower Thursday morning, down 0.1% against the dollar at 10:07 a.m. in London and fractionally lower against the euro.

The Bank of England will make its latest monetary policy announcement at midday, when it is expected to hold rates. Investors will be listening out for clues on whether expectations for a June cut are on track.

Flash composite purchasing managers' index figures released by S&P Global mid-morning showed business output slowed marginally in March, but remained above the 50 mark separating growth from contraction.

Manufacturing production increased for the first time in a year, according to the survey, while services growth was at a three-month low.

"While the composite activity PMI fell a touch in March, it still suggest[s] that the UK economy has probably moved out of recession," Ashley Webb, U.K. economist at Capital Economics, said in a note.

— Jenni Reid

Norway's central bank on Thursday held its policy rate steady, with Governor Ida Wolden Bache saying it would need to be maintained at the current level "for some time ahead" to bring inflation to target.

Norges Bank hiked to 4.5% at its December meeting.

In a statement Thursday, it said monetary policy was having a tightening effect and price inflation was slowing, but that high wage growth and the depreciation of its currency through 2023 would keep inflation "elevated ahead."

The Norwegian economy grew by 0.7% last year, while consumer price inflation was 4.5% in February.

— Jenni Reid

The Swiss National Bank unexpectedly cut rates for first time in nine years on Thursday.

The SNB surprised the market with a decision to lower its main policy rate by 0.25 percentage points to 1.5%, saying national inflation is likely to stay below 2% for the foreseeable future.

The Swiss franc fell sharply against the dollar, down 1.1%, on the move. It hit its weakest level against the euro since last July, with the euro rising 1.2%.

— Karen Gilchrist

A new class of highly effective weight loss medications could deal a blow to several major Swiss food companies while benefiting others, according to Vontobel.

The drugs, which imitate the effects of the GLP-1 hormone to reduce appetite and calorie intake dramatically, are showing remarkable efficacy in clinical trials. As a result, patients lose up to 25% of their body weight on average.

Vontobel said a baked goods maker and a chocolate giant could lose out on the rising trend, affecting their stock. Both are traded over the counter in the U.S.

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— Ganesh Rao

Many on Wall Street have been asking themselves whether markets are getting too euphoric — and if there's a bubble waiting to burst.

Many AI-linked stocks have rocketed.

Veteran tech investor Paul Meeks, co-chief investment officer at Harvest Portfolio Management, says AI infrastructure plays that enable the building of large language models "have legs," naming Nvidia and Advanced Micro Devices as examples.

But on the flip side, some small-cap AI plays are "dangerous," he told CNBC Pro.

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— Weizhen Tan

European markets are set to open higher Thursday.

The U.K.'s FTSE 100 index is expected to open 31 points higher at 7,958, Germany's DAX up 56 points at 18,532, France's CAC 30 points higher at 8,228 and Italy's FTSE MIB up 71 points at 34,273, according to data from IG. 

Earnings will come from Lloyd's of London and JD Sports Fashion is set to issue a trading update. German unemployment data and Italian consumer confidence data for March are due.

— Holly Ellyatt