Wall Street indices rose Thursday on the back of strong US economic growth data but European stocks diverged as the European Central Bank signalled it was too soon to start considering interest rate cuts.
The world’s biggest economy expanded at a faster-than-expected annual rate of 3.3 percent in the fourth quarter, boosted by a resilient jobs market and consumer spending, the Commerce Department said.
Orders for manufactured goods held steady in December, according to a separate report.
“Markets are all about looking forward, and they have a good basis to be optimistic given the boost in confidence, manufacturing and housing data we’ve seen lately,” said Callie Cox, US investment analyst at eToro.
The data raised hopes that the US economy is headed towards a “soft landing” — meaning it could avoid a severe downturn despite interest rate hikes by the US Federal Reserve.
“A recession still isn’t out of the question, and the Fed still has the economy in a vice. But as the days pass and data improves, it sure does look like the Fed is achieving a soft landing with minimal harm to the economy,” Cox said.
Inflation has cooled in the United States and Europe, raising hopes that the Fed and ECB could soon start cutting interest rates that were hiked in efforts to tame consumer prices.
The ECB held its rates steady on Thursday and indicated they would stay at those levels for a “sufficiently long duration” to “make a substantial contribution” to returning inflation to its two-percent target.
The ECB’s “decision was in line with expectations, but it does serve as a reminder that the next move from the ECB is not a straightforward decision,” said Richard Flax, chief investment officer at Moneyfarm.
“The Eurozone economy remains fairly weak, while inflation remains above target, albeit drifting lower. The message from the ECB has been a cautious one — compared to some of the more exuberant market expectations at the end of last year,” he said.
Data showed business morale in Germany sank further in January, as the slump in Europe’s largest economy showed few signs of passing quickly.
London’s FTSE 100 index rose but Paris and Frankfurt were down in afternoon deals.
While US shares were setting new record highs, there were some concerns the recent rally may soon run its course.
“Equities have been propelled to new highs mainly because of the top 7 tech companies and the AI optimism,” said Fawad Razaqzada, market analyst at City Index.
“There is a risk that once this optimism fades, US markets may face a correction from these overbought levels,” he added.
Leading tech stocks, including Microsoft, IBM and Google owner Alphabet, rose on Thursday.
But shares in electric car maker Tesla sank after Elon Musk’s company missed earnings estimates in the fourth quarter and projected slower vehicle growth in 2024.
Oil prices climbed by more than one percent after a bigger-than-expected fall in US crude stockpiles. The dollar was little changed against most currencies.
– Key figures around 1430 GMT –
New York – Dow: UP 0.4 percent at 37,941.86 points
London – FTSE 100: UP 0.1 percent at 7,532.40
Paris – CAC 40: DOWN 0.1 percent at 7,449.57
Frankfurt – DAX: DOWN 0.1 percent at 16,882.77
EURO STOXX 50: UP 0.2 percent at 4,573.98
Tokyo – Nikkei 225: FLAT at 36,236.47 (close)
Hong Kong – Hang Seng Index: UP 2.0 percent at 16,211.96 (close)
Shanghai – Composite: UP 3.0 percent at 2,906.11 (close)
Euro/dollar: DOWN at $1.0862 from $1.0883 on Wednesday
Dollar/yen: DOWN at 147.19 yen from 147.62 yen
Euro/pound: DOWN at 85.42 pence from 85.56 pence
Pound/dollar: FLAT at $1.2717
Brent North Sea Crude: UP 1.3 percent at $81.3 per barrel
West Texas Intermediate: UP 1.4 percent at $76.47 per barrel
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