LONDON, UNITED KINGDOM – Volatile markets were mostly trading up on Thursday after the ECB announced an expected hike to interest rates in the face of sky-high inflation and the US economy posted positive figures.
The European Central Bank rolled out another increase of 75 basis points, despite growing concern the eurozone is hurtling towards a painful recession.
President Christine Lagarde defended criticism of the hikes and said there would be “further rate increases in the future” to bring down inflation.
After fluctuating for much of the day, Eurozone stocks were flat by late afternoon trading.
The ECB hike was widely expected and comes as the Frankfurt institution faces pressure to rein in record-high inflation, mainly driven by skyrocketing energy costs in the wake of Russia’s war in Ukraine.
Markets.com analyst Neil Wilson said the hike was “in line with consensus but (a) less hawkish tone overall, indicative of fewer rate hikes required to tackle inflation.”
Eurozone inflation stood at 9.9 percent in September, nearly five times the ECB’s two-percent target.
The euro lost against the greenback on Thursday, after having traded above one dollar for the first time since last month on Wednesday.
“Overall, we should not forget that the recession risks increase globally, the policy tightening continues in major economies, and there is no sign that inflation is easing,” said Ipek Ozkardeskaya, analyst at Swissquote bank.
Mixed US picture
The New York Dow was up around one percent after the US commerce department data showed gross domestic product rose at an annual rate of 2.6 percent between July and September.
The latest GDP figures reflect “increases in exports, consumer spending” and government spending, according to the government.
But it warned of risks ahead, as households grapple with soaring prices and draw down on their savings.
“The US GDP grew faster than expected, yet looking closely, we see that the exports boosted the headline figure, while imports fell – meaning that the domestic demand from the US weakened despite a significant appreciation of the US dollar,” said Ozkardeskaya.
“The headline figures mask what is happening beneath the surface,” added Fiona Cincotta, Senior Financial Markets Analyst at City Index.
“The reality is that consumer growth, which accounts for more than two-thirds of the US economy, is slowing.”
Credit Suisse shares slide
Traders globally continued to digest earnings updates amid a slew of results from some of the world’s biggest companies.
Shares in Credit Suisse slumped some 18 percent after Switzerland’s second-biggest bank announced a string of radical measures Thursday aimed at turning around the beleaguered lender.
Credit Suisse revealed huge third quarter losses and said it would revamp its investment banking unit, slashing 9,000 jobs and raising fresh capital.
But the world’s top brewer ABInBev posted its best quarter of the year as sales volumes rose.
And London’s benchmark FTSE 100 stocks index climbed, boosted by strong share-price gains for energy heavyweights BP and Shell following the latter’s bumper third-quarter profits on high oil and gas prices.
French giant TotalEnergies said net profits had soared 43 percent on last year to $6.6 billion – adding fuel to the raging debate over windfall taxes on energy firms due to the spike in prices thanks to Russia’s invasion of Ukraine.