ECB On Track To Cut – Europe Market Wrap

Global tech shares rose on Thursday, with Nvidia expected to build on it’s $3 trillion market value as interest rate decreases add to the current frenzy surrounding artificial intelligence.

European equities rocketed to a new all-time high ahead of the European Central Bank meeting, which is expected to result in the first interest rate drop since 2019. US market futures were unchanged after the S&P 500 set its 25th closing record on Wednesday. Nvidia rose nearly 2% in New York premarket trading after becoming the first computer chip maker to reach $3 trillion in valuation.

Other US tech firms, including Micron Technology and Advanced Micro Devices, also rose in premarket trading, while in Europe, ASML Holding NV and ASM International NV surged to record peaks.

The tech euphoria coincides with increasing investor confidence that central banks in the developed world would be able to loosen monetary policy this year. The ECB is expected to drop interest rates by 25 basis points today, a day after the Bank of Canada began its rate-cutting cycle and hinted at further easing. Traders have also begun to price further Federal Reserve easing this year.

Bond yields across Europe ticked higher ahead of the ECB meeting, as traders waited to see if ECB President Lagarde might offer more guidance on the path for additional easing. Wagers on further ECB cuts have turned more cautious in the wake of data showing stronger than anticipated economic growth, inflation and wage increases.

Treasury rates edged higher after declining the previous session, with markets almost fully pricing in two Fed rate cuts in 2024. While a private payrolls reading on Wednesday indicated that hiring at businesses increased at the weakest rate since the beginning of 2024, the services sector expanded the fastest in nine months. Friday’s important monthly payrolls data is likely to indicate that job creation increased in May following a shockingly low figure in April.