European Shares Set To Rally As Fed Begins Easing Cycle With A Bang

European stocks may open on a buoyant note Thursday after the U.S. Federal Reserve kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction, expressing greater confidence about inflation and reiterating its commitment to supporting maximum employment.

The focus now shifts to a Bank of England (BoE) policy meeting later today, with the central bank expected to hold interest rates at 5 percent and express its willingness to cur rates again in November and December.

Data showed on Wednesday that U.K. headline inflation rate was unchanged at 2.2 percent in August, but the core and services readings tick higher, keeping the BoE on alert.

The Bank of Japan announces its monetary policy decision on Friday, with economists expecting no change in interest rates.

Trading later in the day may be impacted by the release of U.S. reports on jobless claims, existing home sales and Philadelphia-area manufacturing activity.

Asian markets were broadly higher, with benchmark indexes in Japan and Hong Kong rising over 2 percent.

The dollar rebounded on higher bond yields while gold fluctuated in Asian trading after touching a record high on Wednesday.

Oil edged up slightly in choppy trade after falling the previous day on signs of weak U.S. demand.

Geopolitical tensions were back in focus after a second wave of blasts struck Hezbollah on Wednesday, killing at least 20 people and pushing Israel and Hezbollah to the brink of all-out war.

U.S. stocks fluctuated before ending in the red overnight and the dollar dropped after the Fed announced a whopping 50 bps rate cut to keep the labor market from slowing too much.

Citing lower inflation, policymakers projected an extra half-point of cuts by the end of this year and a further percentage point of cuts in 2025, cautioning that the central bank would proceed carefully and evaluate the matter “meeting by meeting.”

The Dow and the S&P 500 reached new record intraday highs before ending down about 0.3 percent each for the day. The tech-heavy Nasdaq Composite also slipped 0.3 percent.

European stocks closed lower on Wednesday ahead of the Fed decision.

The pan European STOXX 600 dropped half a percent. The German DAX finished marginally lower, France’s CAC 40 shed 0.6 percent and the U.K.’s FTSE 100 dipped 0.7 percent.