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European stock markets are rising as the ECB expected to cut interest rates

Christine Lagarde.  Prior to the decision, the FTSE 100 was higher

The FTSE 100 and European shares were marginally higher on Thursday as traders await the latest interest rate decision from the European Central Bank (ECB). (IMAGO/Eibner-Pressefoto/Florian Wiegan, Imago)

The FTSE 100 (^FTSE) and European shares were marginally higher on Thursday as traders awaited the latest interest rate decision from the European Central Bank (ECB). Borrowing costs across the eurozone are widely expected to fall for the first time in five years, from 4% to 3.75%.

It comes at a time when inflation in the eurozone has cooled this year to 2.6% in the year to May. The bank could also start unwinding a tightening cycle that began in the summer of 2022 and has pushed the ECB’s deposit rate to record highs.

The money markets are betting that a rate cut has a 92% probability, with only an 8% chance of no change. The decision will come at 1.15pm UK time.

Henk Potts, market strategist at Barclays Private Bank, said: “After nine months of unchanged interest rates, we expect the European Central Bank to enter a rate cutting cycle at its meeting on Thursday 6 June. A quarter-point cut in the policy rate is expected, the first cut since 2019.

“Our view is that the Governing Council’s rationale is likely to be driven by a stronger-than-expected recovery in activity and increased confidence that inflation will return to target levels. After the June meeting, we predict we could see a quarter-point drop. in September and December. In addition, we expect a cut of 75 basis points next year, with the deposit rate ending at 2.5% in 2025.”

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  • Nvidia surpasses $3 trillion in valuation, overtaking Apple

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    Nvidia shares closed above $3 trillion last night for the first time ever, overtaking Apple as the second-largest publicly traded company in the world.

    The company’s stock price rose more than 5% to more than $1,224 on Wednesday.

    It comes as Nvidia has been the example of investor enthusiasm for AI, which accelerated with OpenAI’s release of ChatGPT in late 2022.

    The stock is up more than 140% this year and 200% last year; Nvidia shares are up more than 3,300% in the past five years.

    Its market value is now just behind that of Microsoft, another major player in the sector thanks to its investments in Chat GPT maker OpenAI.

  • Asian and American stocks

    Stock markets in Asia rose largely overnight after Wall Street hit new records thanks to the ongoing frenzy surrounding artificial intelligence technology.

    The Nikkei (^N225) rose 0.55% in Japan on the day, while the Hang Seng (^HSI) in Hong Kong rose almost 0.2%. The Shanghai Composite (000001.SS) was down 0.5% at the end of the session.

    The South Korean markets were closed for a holiday.

    Meanwhile, data from the Australian Bureau of Statistics showed the country’s trade surplus recovered in April, with exports falling 2.5% and imports falling 7.2%.

    It comes after the S&P 500 (^GSPC) rose 1.2% to 5,354.03 on Wednesday, topping its all-time high set two weeks ago.

    The tech-heavy Nasdaq (^IXIC) rose 2% to 17,187.90, also setting a new record. The Dow Jones (^DJI), which places less emphasis on technology, lagged the market with a gain of 0.2% to 38,807.33.

  • Shortly…

    Good morning, and welcome back to our live markets blog. As usual, we’ll be reporting on what’s happening in the global economy and looking at what’s moving the markets, so be sure to stick around.

    Here’s a quick look at what’s on the agenda today:

    • 7 hours: Trading updates: Fevertree, Mitie, Schroder Real

    • 9:30 am: UK Construction PMI Report for May

    • 9:30 am: UK economic activity and business insights

    • 1:15 p.m: Interest rate decision of the European Central Bank

    • 1:30 p.m: US weekly unemployment claims

    • 1:30 p.m: US trade balance for April

    • 1:45 p.m: Press conference of the European Central Bank

Watch: How Does Inflation Affect Interest Rates?

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