Europe close: Stoxx 600 hits another record after ECB rate cut

(Sharecast News) - The Stoxx 600 index rose for the third straight day on Thursday to close at another record high after the European Central Bank cut interest rates and data showed that the eurozone economy stalled in the fourth quarter. The pan-European benchmark finished 0.9% higher at 539.06, surpassing record highs made the previous two sessions. The index has now risen by 5.6% in January alone.

Disinflation "is well on track" and expected to return to the 2.0% medium-term target in 2025, the ECB said in its policy statement, after cutting rates on its deposit facility, main refinancing operations and marginal lending facility by 25 basis points each to 2.75%, 2.90% and 3.15%, respectively.

As ever, the ECB kept all its options open, saying that "the Governing Council is not pre-committing to a particular rate path". Nevertheless, ECB chief Christine Lagarde was clear that rates were headed lower still. She told journalists in a press confidence that there had been no discussion on Thursday about when to stop lowering rates.

In economic data, the eurozone flatlined in the fourth quarter, with no GDP growth compared with a 0.4% expansion the third. This was below the 0.1% increase expected by economists as German GDP contracted more than expected (-0.2% quarter-on-quarter).

"Eurozone GDP stalling and the German economy - in a mild recession since 2023 - shrinking more than expected in Q4 have [...] increased the odds for further ECB rate cuts," said Axel Rudolph, senior technical analyst at IG>

In other news, the eurozone seasonally-adjusted unemployment rate in December was 6.3%, up from 6.2% in November 2024 and down from 6.5% in December 2023, in line with the consensus forecast.

Market movers

Shares in Deutsche Bank declined 2% as the German lender reported a sharp drop in fourth-quarter and full-year 2024 profit on Thursday, falling short of market expectations as legal provisions and restructuring costs offset strong investment banking revenue.

UK-listed oil giant Shell gained 3% after lifting its dividend even as it posted a bigger-than-expected drop in fourth-quarter profits. Fourth-quarter adjusted earnings fell to $3.66bn from $6bn in the third quarter.

H&M reported stronger-than-expected fourth-quarter earnings, signaling progress in its ongoing turnaround strategy, but that didn't stop shares in the Swedish fast fashion group falling 4%.

Airtel Africa surged 9% in London after a well-received third-quarter update and as it announced the launch of a second share buyback programme.