European stocks propelled higher by technology before the ECB: markets fall

(Bloomberg) — European stocks rose ahead of a widely expected interest rate cut by the European Central Bank, as markets reassessed bets on policy easing this year.

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Technology stocks led gains in the Stoxx 600 index after the sector fueled new all-time highs on Wall Street on Wednesday. U.S. stock futures stabilized after the S&P 500 closed for a record 25th time this year. Nvidia Corp., a major beneficiary of the massive influx of investment in artificial intelligence, became the first computer chip company to reach a market capitalization of $3 trillion.

“Behind the optimism we see in the markets, technology continues to lead the pack,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management. “If you look at earnings revisions to see what’s working and what’s not, technology is leading the way.”

Attention will turn to the ECB later, as traders seek guidance on the way forward on monetary policy, including from President Christine Lagarde at the press conference. Views on further rate cuts this year have become more cautious following data showing stronger-than-expected economic growth, inflation and wage increases.

As investors awaited the U.S. jobs report released Friday, a private employment report released Wednesday showed corporate hiring grew at the slowest pace since the start of the year. At the same time, the services sector recorded its strongest growth in nine months, thanks to the largest monthly gain in a measure of business activity since 2021.

The Bloomberg Global Government Bond Index rose for a fifth straight session on Wednesday, its best performance since December, as traders stepped up their bets on a rate cut. The dollar retreated as Canadian policymakers cut borrowing costs on Wednesday, putting more emphasis on the path of U.S. rates.

“There is a little more optimism that the Fed will be able to cut rates in the second half of this year,” said Northwestern Mutual’s Stucky. “With the Bank of Canada cutting rates and hopes that the ECB will do so, the momentum behind a coordinated global easing cycle is starting to build.”

Treasury yields rose slightly after falling in the previous session, with markets almost fully pricing in two Federal Reserve rate cuts in 2024.

In Asia, stocks rose for the first time in three days as Indian stocks extended gains after Prime Minister Narendra Modi secured crucial support from two key allies in his coalition.

In Japan, the yen pared earlier gains after Bank of Japan board member Toyoaki Nakamura said it was appropriate to maintain current policy for the time being. The Japanese currency recovered from an overnight selloff in a week that was volatile for the yen thanks to its role in emerging market carry trades.

Elsewhere, Chinese property stocks were poised to enter a technically bear market as doubts remained over Beijing’s efforts to support the sector. A Bloomberg Intelligence gauge of…

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