European Stocks Soar to Record, Stoxx 600 Up 0.3%

Key Takeaway

• European stocks hit record highs, led by strong earnings from Anheuser-Busch InBev and Siemens Energy, with the Stoxx 600 up 0.3%.
• ECB's expected rate cuts from June and Riksbank's recent reduction fuel positive market sentiment, driving European stocks up 2.1% this month.
• Swedish krona depreciates following Riksbank's rate cut, highlighting central banks' significant impact on currency stability and market dynamics.

European Stocks Surge to Record Highs

European markets have experienced a notable uplift, reaching new record highs, driven by a combination of strong corporate earnings and positive market sentiment. The Stoxx 600 Index, a key indicator of European stock market performance, saw a 0.3% increase by the close in London, marking its fourth consecutive day of gains. This rally was led by significant contributions from the food & beverages sector, with Anheuser-Busch InBev NV (AB InBev) reporting better-than-expected volumes and sales in North America. Additionally, Siemens Energy AG's shares were lifted following an outlook upgrade, and Alstom SA's stock soared after the company announced a capital increase of about €1 billion ($1.1 billion) to strengthen its balance sheet.

Central Banks Influence Market Dynamics

The European Central Bank (ECB) and the Federal Reserve's anticipated monetary policy adjustments have played a crucial role in shaping investor expectations and market movements. The ECB is expected to start reducing interest rates from June, contributing to the positive momentum in European stocks, which have added 2.1% already this month. Similarly, last week's weaker US jobs data has bolstered confidence that the Federal Reserve might commence rate cuts within the year. In a notable development, Sweden's Riksbank initiated its rate-cutting cycle, reducing its benchmark interest rate by 25 basis points to 3.75%, marking its first rate cut in eight years. This decision has sparked discussions about the potential for further rate reductions in 2024, highlighting the central banks' significant influence on market dynamics.

Currency Fluctuations Post-Rate Cut

Following the Riksbank's rate cut announcement, the Swedish krona faced downward pressure, depreciating by 0.4% against the US dollar and pausing its brief rally against the euro. This movement reflects the market's reaction to Sweden's economic indicators, which have shown signs of weakness, such as disappointing retail sales and services PMI figures. The krona's depreciation is particularly noteworthy given its prior appreciation against the euro, and the Riksbank's decision has reignited concerns over the currency's stability. The contrast between the Riksbank's easing policy and the ECB's steady stance further complicates the currency's outlook, especially if the ECB maintains its current policy direction.

Street Views

• Guillermo Hernandez Sampere, MPPM (Bullish on European stocks):

  "The blue chips on the European markets continue to set the direction."