European markets end higher as investors cheer Fed cut

FRANKFURT: European shares closed higher on Thursday after a series of lukewarm sessions, as investors welcomed the US Federal Reserve’s overnight interest rate cut and assessed a policy decision from the Swiss National Bank.

The pan-European STOXX 600 ended 0.5 percent higher at 581.17 points, after a muted start to the session amid renewed worries about lofty tech valuations following cloud computing giant Oracle’s hefty AI spending plans. Major regional bourses were broadly higher, with France’s CAC 40 up 0.8 percent and London’s FTSE 100 up 0.5 percent.

In the STOXX 600, at least 19 sectors were in the green, with optimism stemming from the Fed’s meeting, where it cut rates by 25 basis points. However, the central bank cautioned against further reductions in the near term until there is more clarity on the labour market.

“So, in a way, the message was a bit hawkish,” said Bas van Geffen, quantitative analyst at Rabobank, adding that despite the Fed’s projection of one more cut in 2026, “we think the Fed will, in reality, cut more.”

Investors also see a higher likelihood that White House economic adviser Kevin Hassett will become the next Fed chair, a scenario that could lead to more rate cuts next year.

Separately, the Swiss National Bank left its policy rate unchanged at 0 percent and said a recent agreement to reduce US tariffs on Swiss goods had improved the economic outlook, even as inflation has somewhat undershot expectations.

The country’s local currency franc strengthened 0.25 percent against the euro.

Meanwhile, the region-wide banking index gained 1.7 percent. Exane BNP Paribas backed lenders such as Unicredit and ING, saying they are set to generate an average Return on Tangible Equity (ROTE) of more than 16 percent in 2027.

Unicredit was up 2.4 percent and ING added 2.2 percent. BBVA rose 2.3 percent after completing the buyback program.

Concerns also emerged for the sector after the European Central Bank proposed to simplify bank regulation, but failed to address easing the overall financial burdens on lenders.