UK Indices Climb as Inflation Eases, DAX Shifts in Anticipation of ECB Rate Cuts

The UK’s main stock indices rose on Wednesday as a key inflation reading revealed that British inflation fell more than predicted, bolstering the case for a rate cut by the Bank of England.

The blue-chip FTSE 100 (.FTSE) rose over 1% to a near-four-week high on Wednesday, while the mid-cap FTSE 250 index (.FTMC) soared 0.9% to a two-week closing high.

However, on Thursday, FTSE 100 started the session in greens, but within an hour, it fell with a 0.060% decline. Similarly, the FTSE 250 index mirrored this trend, moving lower with a drop of 0.028%.

Yesterday, on October 16, the precious metal miners (.FTNMX551030) led sectoral gains, climbing 3.3%, while rate-sensitive real estate (.FTNMX402020) increased 3%.

Consumer price index statistics showed that British inflation declined more than predicted in September, to 1.7% from 2.2% in August. A Reuters poll predicted a 1.9% reduction in the CPI.

⚠️ JUST IN:

*UK SEPTEMBER CORE CPI INFLATION RISES 3.2% Y/Y; EST. 3.4%; PREV. 3.6%

*LOWEST SINCE SEPTEMBER 2021

🇬🇧🇬🇧 pic.twitter.com/tvaqIZDCKD

— Investing.com (@Investingcom) October 16, 2024

The pound sank 0.6% against the dollar, providing additional support for British equities. Non-life insurers (.FTNMX303020) fell 1.7% after the Financial Conduct Authority launched a probe of the premium finance industry, raising concerns that consumers who borrow to pay for car and home insurance may not be getting fair or competitive rates.

For the third quarter, the FTSE 100 group announced flat revenues year on year, up 3.8% at constant currency rates, with organic growth of 2.6%, down from 2.8% in the first half.

Europe Braces for Consecutive Rate Cuts

The European Central Bank’s interest rates are expected to decrease for the third time this year when officials announce their decision later today.

The quarter-point drop in the deposit rate to 3.25% comes after a string of dismal economic statistics and evidence that inflation is returning to target.

The European Central Bank (ECB) is widely expected to cut interest rates on Thursday for the third time this year.
Euro Zone Bond Yields Drop Ahead Of Anticipated ECB Rate Cut. pic.twitter.com/CPga3uguaD

— Jayanth Ukwaththa (@JUkwaththa) October 16, 2024

According to Deutsche Bank economists, the first back-to-back rate cuts of the cycle signalled a shift toward faster easing. Despite this, the bank does not expect the ECB to abandon its present ‘data-reliant, meeting by meeting’ approach to policy.

Following today, Deutsche Bank expects the ECB to decrease rates at each meeting until they hit 2.25% in April.

Nonetheless, as the trading continues, Further FTSE 100 gains are expected on Thursday, following a solid session for US markets overnight and with traders awaiting the European Central Bank’s policy announcement later.

The FTSE 100 index is forecast to gain by 28 points to 8358 after closing 1% higher last night in anticipation of faster interest rate reduction.

DAX Movements in Anticipation of ECB Decision

On Wednesday, October 16, the DAX fell 0.27%, following a 0.11% loss the previous day, to close at 19,433. As investors awaited Thursday’s ECB interest rate announcement, the DAX fell due to disappointing corporate profits and concerns about slowing Chinese demand.

However, the Dax opened higher on the day of the ECB’s interest rate decision. Shares of Sartorius and Merck KGaA rose, providing support. Many investors’ fears regarding corporate development have subsided.