Stocks in Europe ended mixed and off early highs on Thursday after the European Central Bank signalled it was nearing the end of its rate-cutting cycle.
The FTSE 100 index closed up 9.75 points, 0.1%, at 8,811.04. It had earlier traded as high as 8,838.84.
The FTSE 250 ended 49.63 points lower, 0.2%, at 21,069.38, and the AIM All-Share closed up just 0.11 of a point at 754.46.
In European equities on Thursday, the CAC 40 in Paris fell 0.1%, while the DAX 40 in Frankfurt firmed 0.2%. Both indices had traded higher earlier in the trading session.
The ECB lowered its three key interest rates by 25 basis points on Thursday, bringing the rate on the deposit facility to 2.00%, the main refinancing operations to 2.15%, and the marginal lending facility to 2.40%.
At the press conference, ECB president Christine Lagarde said the bank is getting to the end of the monetary policy cycle but refused to declare victory on inflation.
“Victory laps are always nice, but there is always another battle,” Ms Lagarde told reporters.
But, she added: “I think we are getting to the end of a monetary policy cycle that was responding to compounded shocks, including Covid, the war in Ukraine … and the energy crisis.”
“This was a hawkish surprise that the market was not expecting,” Kathleen Brooks at XTB Research said.
“Although the ECB is still expected to cut rates one more time, the market is pricing in a 45% chance of a cut in September, which is down from a 55% chance of a cut earlier this week,” she added.
The pound was quoted up at 1.3596 US dollars late on Thursday afternoon in London, compared to 1.3566 dollars at the equities close on Wednesday. The euro stood higher at 1.1456 dollars against 1.1425 dollars.
ING still expects the ECB to cut rates in September.
“Unless trade tensions escalate again, the often mentioned direction of travel for the ECB over the summer is clear: vacation, before cutting rates once more in September,” the broker said.
Against the yen, the dollar was trading higher at 143.57 yen compared to 142.98 yen.
In New York, the Dow Jones Industrial Average was up 0.3% at the time of the London equities close on Thursday, the S&P 500 was up 0.4% and the Nasdaq Composite was 0.7% higher.
Chinese state media reported that President Xi Jinping had held a widely anticipated call with US President Donald Trump, with investors hoping it could ease trade tensions – but no details were provided.
The call follows officials from the world’s two biggest economies accusing each other of jeopardising a trade war truce agreed last month in Geneva.
