The European Central Bank (ECB) is preparing to raise interest rates for the first time since 2023, which is expected to happen today, Thursday, amid rising inflation driven by higher energy prices and the war in Iran. Investors expect a 25 basis point rate hike, which could impact economic growth and corporate profits.
Markets widely expect the ECB to raise rates by 25 basis points from 2.0% to 2.25%. Analysts at ING noted in their morning analysis: “We expect the ECB to raise the rate by 25 basis points from 2.0% to 2.25%, backed by a hawkish tone, but the bar for surprising markets has risen.” Investors are also waiting for guidance on possible further rate hikes.
Despite caution, European stock markets opened in positive territory, even as Asian stocks declined. The Euro Stoxx 50 index rose by 1.2%, while the broader pan-European Stoxx 600 remained unchanged at the start of trading. The German Dax rose by 1%, and the French CAC 40 also gained 1%. The British FTSE 100 led with a gain of 1.2%, and the Italian FTSE MIB rose by 0.7%.
Global Markets and AI-Related Stock Decline
Asian stocks mostly fell on Thursday after another sell-off of artificial intelligence (AI)-related stocks on Wall Street on Wednesday. The Japanese Nikkei 225 lost 0.5%, the South Korean Kospi fell by 0.2%, and the Australian S&P/ASX 200 declined by 0.2%. The Taiwanese Taiex decreased by 0.4%, while the Hong Kong Hang Seng rose by 0.2%, and the Shanghai Composite fell by 0.2%. Oil prices rose.
On Wall Street, the S&P 500 index fell by 1.6% on Wednesday, marking its first consecutive decline in three weeks. The industrial Dow Jones index dropped by 1.9%, and the Nasdaq Composite lost 2%. The US market has been volatile since last week, when AI stocks changed course after reaching record highs. Investors are weighing whether the recent decline has eased concerns about excessive optimism or signals the start of a more prolonged downturn.
Super Micro Computer, which sells AI servers, fell by 28% after announcing plans to raise $7 billion through the sale of common and convertible preferred shares. Such moves are often made when stock prices are high but can dilute existing shareholders’ stakes. Micron Technology stocks fluctuated between gains and losses, ending the day down by 4.7%, although they have risen by 212.5% since the beginning of the year.
Chipmaker Nvidia, which has grown into a company worth nearly $4.9 trillion thanks to the AI boom, became the biggest drag on the S&P 500, falling by 3.7%. Broadcom, another major AI beneficiary, lost 5.1%. Part of the pressure on AI-related stocks may also be due to investors raising cash ahead of several high-profile US stock market debuts, including a possible initial public offering (IPO) of SpaceX later this week.
Source: Euronews