The fight against inflation is not yet over, Christine Lagarde has warned, after the European Central Bank (ECB) cut interest rates for the first time in five years.
The ECB President refused to say that the eurozone has entered a period when it is “dialling back” interest rates.
She told a press conference in Frankfurt: “Are we today moving into a dialling back phase? I wouldn’t volunteer that because, as I said, we are making a decisions based on the confidence we have that we are on a path.”
Policymakers cut interest rates from their record highs of 4pc to 3.75pc as the eurozone gambles that the inflation crisis on the continent is under control.
It reduces eurozone borrowing costs for the first time since 2019 – and crucially before the Bank of England and US Federal Reserve.
However, the ECB has also increased its predictions for inflation over the next two years.
It projected inflation will average 2.5pc this year, up from previous estimates of 2.3pc, and would be 2.2pc in 2025, up from 2pc.
It comes as inflation in the eurozone has fallen to 2.6pc from a peak of 10.6pc in October 2022, although it has ticked up from 2.4pc in April.
Policymakers said they are “not pre-committing to a particular rate path” as they insisted future decisions on rate cuts would be “data dependent”.
Read the latest updates below.
That’s all from me today. Chris Price will be back tomorrow morning from 7am. Have a lovely evening
Global stocks hit an all-time high on Thursday after the European Central Bank’s first interest rate cut.
The MSCI All Country World Index jumped by 0.86pc on Thursday to 3,483.4, after the ECB cut interest rates for the first time in nearly five years.
The index, which tracks share prices across 47 countries, was up by a tenth since the start of this year.
Share prices typically rise when interest rates fall as bonds become less attractive for investors and borrowing becomes cheaper for companies.
The FTSE 100 Index rose by 0.47pc to 8285.34 on Thursday, while in the US the S&P 500 was flat at a near all-time high.
Claims for US unemployment benefits jumped by more than expected at the end of May, bringing more evidence that labour market pressures are easing.
Initial jobless claims rose by 8,000 to 229,000 in the week ending June 1, according to Labor Department figures on Thursday.
This was 9,000 more than analysts had expected and shows the employment market is slowing down, but analysts warned this will not be enough to pave the way for Federal Reserve rate cuts yet.
Ryan Sweet, Chief US Economist at Oxford Economics, said: “The four-week moving average was little changed and remains comfortably below our estimate of the breakeven level, or that consistent with no monthly job growth.”
All eyes will be on May non-farm payrolls data out on Friday, which will be closely-watched by the Fed.
The US trade deficit hit a two-and-a-half year high of nearly $75bn in April in the latest sign that the world’s largest economy is slowing down.
Official data shows the US imported $74.6bn more in goods and services than it sold in exports in April, up $6bn since March and the biggest gap since October 2022.
This was driven by a surge in goods imports, including cars and computers, drove a $5.9bn increase in the goods deficit, which rose to $99.2bn.
The figures show trade is increasingly becoming a drag on economic growth in the US.
In the first three months of the year, trade subtracted from GDP, rather than increasing it, for the first time since the beginning of 2022.
The cost of government borrowing has increased across Europe after the ECB said it thinks inflation will be higher than previously expected this year and in 2025.
The central bank projected inflation will average 2.5pc this year, up from previous estimates of 2.3pc, and would be 2.2pc in 2025, up from 2pc.
The yield on 10-year German bunds, the benchmark bond for the eurozone, has risen five basis points to 2.56pc following the new projections.
By contrast, the 10-year UK gilt yield was flat at 4.19pc.
With that, I will head off for the day and leave you in the hands of Melissa Lawford, who will keep you updated as you head towards the evening.
The new boss of NatWest has laid out his plans to drive more automation across the bank, after shrinking its top team and as it prepares to work with a potentially new government to return entirely to private ownership.
Paul Thwaite, who became NatWest’s permanent chief executive in February, said there was a “lot to do” to simplify the business.
His remarks come a day after shadow chancellor Rachel Reeves said Labour had no plans to “deviate” from the Conservative government’s plan to offload its remaining stake in NatWest.
Mr Thwaite, speaking at a Goldman Sachs European Financials Conference, said:
Christine Lagarde’s commentary indicates that the European Central Bank is not about to embark on a series of interest rate cuts, according to analysts.
Matthew Ryan, head of market strategy at Ebury, described the ECB’s actions as a “hawkish cut”, while Neil Shah of Edison Group said the decision was a “bold move” after inflation ticked higher from 2.4pc to 2.6pc in May.
George Lagarias, chief economist at Forvis Mazars, said:
As she came towards the end of her press conference, Christine Lagarde was asked about cutting interest rates at the same time as the ECB raised its inflation forecast. She said:
She added that in her “sleepless nights” she bears in mind “that little voice that says carry on, carry on” as she remembers that in October 2022, inflation in the eurozone was at 10.6pc, and was at 5.2pc in August 2023 less than a year later.
“I don’t want to divide the next inflation by two because if we divide 2.6pc by two we have 1.3pc. Our commitment is 2pc. We don’t want to go there.”
Wall Street stocks opened slightly higher, a day after the S&P 500 and Nasdaq indices hit fresh records as AI-chip leader Nvidia saw its market capitalisation soar above $3 trillion.
Nvidia was only the third US company to hit a market value of that level, after Apple and Microsoft, and its shares rose around 2pc in early trading.
The Dow Jones Industrial Average slipped 0.1 percent to 38,779.27, while the broad-based S&P 500 edged up 0.1 percent to 5,359.58.
The tech-focused Nasdaq Composite Index rose 0.3 percent to 17,230.14.
Christine Lagarde is wearing a necklace emblazoned with the words “in charge” at the press conference in Frankfurt, where the ECB has lowered borrowing costs from record highs of 4pc to 3.75pc.
The euro moved slightly higher after Christine Lagarde said the European Central Bank is not yet in a “dialling back” phase on interest rates.
The single currency was up 0.2pc against the pound at 0.852p, but was flat against the dollar at $1.088.
Ms Lagarde confirmed that the decision to cut rates was not unanimous, with one member of the Governing Council voting against cutting rates from their record highs of 4pc.
She also warned the next few months will be “bumpy” for inflation.
Christine Lagarde refused to say that the eurozone has entered a period when the European Central Bank is “dialling back” interest rates.
She told the press conference in Frankfurt:
Christine Lagarde said the ECB’s “confidence has increased in the path ahead” as it cut interest rates to 3.75pc.
She said there had been two successive phases of inflation before today’s decision.
She said the first phase “was of very robust and rapid tightening”.
“We tightened by 450 basis poiints between July 22 and September 23 and then we went into a phase of holding from September 23 until today.”
She said that during each of these phases, the ECB “divided inflation by half”.
“We were at 10.6, fast forward in September 2023 we are at 5.2pc, fast forward to today and we are at 2.6pc.”
She said that the ECB needs to have enough data to make relevant decisions.
Christine Lagarde said the Governing Council began its meeting this morning with a tribute to those who fought on the beaches of Normandy during the D-Day landings 80 years ago today.
She said: “We started our meeting this morning by paying tribute to the many men and women who sacrificed their lives on the beach of Normandy 80 years ago today.”
She hailed their bravery which has allowed society today “to disagree in a very civilised way”.
Inflation could turn out higher than anticipated if wages or profits turn out higher than anticipated, Christine Lagarde has warned.
The European Central Bank president said inflation is likely to fluctuate around current levels this year.
She added that market interest rates have risen since the last meeting of the Governing Council and “credit dynamics remain weak”.
“Loans to households continued to grow at 0.2pc on an annual basis,” she added.
Inflation in the eurozone will fall to the European Central Bank’s 2pc target in the second half of next year, President Christine Lagarde has said.
She said profits are “absorbing part of wage increases” and weaker growth in labour costs and the fading impact of the energy crisis and the pandemic would support this.
She said the risks to economic growth are “balanced in the near term” but are “tilted towards the downside” in the medium term.
Christine Lagarde said monetary policy should be less of a drag on demand over time as she said strong exports would support growth in Europe in the near term.
She said that the region’s economy continues to recovery but warned that domestic inflation remains high.
She told the press conference in Frankfurt that wages are rising at an elevated pace but labour costs will likely fluctuate.
European Central Bank president Christine Lagarde has begun her press conference in Frankfurt.
Repeating its statement alongside its decision, she said:
The European Central Bank raised its growth forecast for 2024 to 0.9pc from 0.6pc, while predicting slightly lower output than previously expected in the following year.
The eurozone economy is expected to expand by 1.4pc in 2025 rather than the 1.5pc predicted in March.
In 2026, growth is seen reaching 1.6pc.
Christine Lagarde is holding a press conference after the European Central Bank lowered interest rates from 4pc to 3.75pc at its meeting today.
She will be quizzed on why the Governing Council has lowered borrowing costs despite raising its predictions for inflation.
Watch the event here:
Andrew Kenningham, chief Europe economist at Capital Economics, said:
As the ECB cut interest rates, Lindsay James, investment strategist at Quilter Investors, said:
As it increased its prediction for inflation, the ECB’s Governing Council said:
The European Central Bank has cut interest rates from their record highs despite raising its forecasts for inflation.
The central bank said it inflation projection for 2025 to 2.2pc, up from 2pc, as it lowered borrowing costs from 4pc to 3.75pc.
It expects inflation this year to average 2.5pc, up from previous predictions of 2.3pc.
Policymakers at the European Central Bank said they are “not pre-committing to a particular rate path” as they cut interest rates to 3.75pc.
The Governing Council, which sets rates, hinted that today’s reduction in borrowing costs was not the start of a trend, as it said:
The European Central Bank has cut interest rates from their record highs as the eurozone gambles that the inflation crisis on the continent is under control.
The central bank lowered its deposit rate from 4pc to 3.75pc at its meeting today, reducing borrowing costs before the Bank of England and US Federal Reserve.
It comes as inflation in the eurozone has fallen to 2.6pc from a peak of 10.6pc in October 2022, although it has ticked up from 2.4pc in April.
The European Central Bank is expected to lower interest rates from their record highs as it gambles that the inflation crisis on the continent is under control.
The eurozone’s central bank is widely anticipated to lower borrowing costs from their record highs of 4pc to 3.75pc at a meeting today.
The move would be significant as it would be ahead of the Bank of England and US Federal Reserve.
It comes as inflation in the eurozone has fallen to 2.6pc from a peak of 10.6pc in October 2022, although it has ticked up from 2.4pc in April.
European gas prices have risen as Norway races to fix a pipeline to Britain.
Dutch front-month futures, the continent’s benchmark, gained as much as 2.8pc as Gassco battles to fix an issue with flows to the Easington terminal in East Yorkshire by a self-imposed Saturday deadline.
It is also ramping up efforts to send gas to alternative entry points in the meantime to compensate for the shortfall, which saw gas flows fall to zero earlier this week at the key UK terminal.
Gas stockpiles remain more than 70pc full in Europe, but the risk of a hot summer could quickly deplete reserves if demand for air conditioning is ramped up.
Prices remain around €34 per megawatt hour, dramatically down from their peak of €339 at the height of the energy crisis triggered by Vladimir Putin’s invasion of Ukraine in 2022.
Elon Musk’s SpaceX is making preparations for the fourth launch of Starship, its superheavy rocket which it is hoped will one day return mankind to the Moon.
US stocks were little changed ahead of an expected interest rate cut by the European Central Bank.
The S&P 500 was flat in premarket trading, while the Dow Jones Industrial Average was down 0.1pc.
Nasdaq futures inched higher as gains in AI-chip behemoth Nvidia boosted optimism around the tech sector.
A tech rally on Wednesday drove the S&P 500 and the Nasdaq to all-time highs, as a string of weakening economic data boosted bets that the Federal Reserve could start easing policy in September.
Megacap tech stocks were the main driver of the rally, with the tech sector gaining nearly 2.6pc as Treasury yields eased.
Stocks including Meta, Microsoft and Apple were down between 0.04pc and 0.3pc in premarket trading.
However, chip maker Nvidia was up 1pc, after crossing $3 trillion in market valuation in the previous session that saw it overtake Apple as the world’s second most valuable company.
Indian Prime Minister Narendra Modi has said he looks forward to forging closer ties with Taiwan after he secured an historic third term in office.
Mr Modi responded to a tweet by Taiwanese President Lai Ching-te, who had congratulated him on his election victory.
He said: “I look forward to closer ties as we work towards mutually beneficial economic and technological partnership.”
Mr Modi faces the challenge of managing a tense relationship with China, which claims the island of Taiwan as part of its territory.
The pound has inched higher ahead of a widely-expected cut to interest rates by the European Central Bank today.
Sterling was 0.1pc stronger against the euro, which is worth 85p, although it fell slightly against the dollar to $1.278.
Greece’s banks will pay dividends for the first time since the global financial crisis after being given the all clear from the European Central Bank.
Eurobank Ergasias Services and National Bank of Greece will return the largest amount to shareholders, with payments of €342m (£291m) and €332m (£283m) respectively.
The country’s banks have not paid out to shareholders since it entered its sovereign debt crisis in 2010.
A loss of confidence in the Green economy led to bailouts from the International Monetary Fund, Eurogroup, and the European Central Bank in 2010, 2012, and 2015.
The Greek banks index rose as much as 2pc following the announcements from the country’s lenders on dividends.
Oil prices have edged up despite Saudi Arabia cutting its crude prices.
Brent climbed 0.2pc towards $79 a barrel and US-produced West Texas Intermediate traded gained 0.3pc to more than $74.
It comes despite Saudi Aramco lowering prices for all of its oil to Asia next month — the first reduction since February — raising concerns over the strength of demand in the world’s top crude importing region.
Oil has trended lower since early April amid a weak outlook for China and as geopolitical tensions in the Middle East have eased.
Meanwhile, US crude inventories rose by 1.23m barrels last week, according to government data released Wednesday.
Business executives expect wage growth to fall and the cost of borrowing to decline over the next year amid an easing of the inflation crisis that has gripped the economy.
Finance chiefs told the Bank of England that they think wage growth will reach 4.5pc on a three-month moving-average basis over the next year, which is down 0.3 percentage points from their outlook in April.
Firms also reported that the average interest rate that they were paying on their borrowing (both bank and market based) was 6.6pc in May, which was 0.4 percentage points lower than reported in April.
Meanwhile, they expect to increase prices by 3.9pc over the next year, which was down slightly from 4pc in April and the lowest since September 2021.
Retail sales slowed in the eurozone last month, official data shows ahead of an expected cut in interest rates by the European Central Bank.
Volumes fell by 0.5pc in April compared to March, figures from Eurostat showed, following growth of 0.7pc over the previous month.
The UK’s construction sector grew at the fastest pace for two years in May as business confidence improved, according to new data.
The latest S&P Global construction purchasing managers’ index (PMI) scored 54.7 in May, jumping from 53.0 in April.
It was significantly stronger than expected, after analysts predicted a reading of 52.5 for the month.
Any score above the 50.0 threshold indicates that activity in the industry is increasing, while anything below means it is shrinking.
Andrew Harker, economics director at S&P Global Market Intelligence, said:
The company behind fashion brands JD Williams and Simply Be has reported weaker sales as shoppers continued to tighten their belts, but hailed a return to an annual profit.
Shares in N Brown, which also owns menswear brand Jacamo, soared by nearly a fifth after it revealed it had shored up its balance sheet over the past year.
The company, which recently launched a campaign with Denise Van Outen through its JD Williams brand, swung to a pre-tax profit of £5.3m for the year, having recorded a £71m loss the prior year.
Nevertheless, it faced challenging market conditions with cost-of-living pressures reflected in consumer spending behaviour.
It reported group revenues of £601m in the year to March, a 10th lower than the £666m reported this time last year.
N Brown said it felt the effect of cautious customer buying behaviour leading to fewer online orders.
Global investment in energy surged to more than $3 trillion last year – with record amounts invested in extracting fossil fuels such as coal, oil and gas, as well as on renewables, a report from the International Energy Agency said.
Our energy editor Jonathan Leake has the details:
Mohit Kumar, chief European economist at Jefferies, said:
Fever-Tree shares have risen in early trading after a it reassured investors about growth in the US and Europe ahead of its annual shareholder meeting today.
The tonic maker said it has “strengthened its category leading position” in the UK, while it “continues to be the biggest contributor to growth within the carbonated mixer category” in the US.
It said the brand has continued to “deliver topline growth in the year to date”.
Shares gained as much as 3.8pc.
UK stocks edged higher amid expectations of an interest rate cut by the European Central Bank (ECB).
The blue-chip FTSE 100 edged up 0.1pc, leaving it poised for a second consecutive day of gains, while the pound held steady at $1.28. The mid-cap FTSE 250 was up 0.3pc.
The ECB’s monetary policy decision has been heavily trailed but investors are keen to hear remarks from the central bank’s president, Christine Lagarde, in a press conference this afternoon.
On Wednesday, the Bank of Canada led the charge among G7 nations by announcing an interest rate cut to 4.75pc, having held borrowing costs at 5pc since July last year.
The Bank of England is poised to align closely with the ECB’s forthcoming rate action, and has its next meeting in two weeks.
Among individual stocks, Wood Group surged 10.3pc to the top of the FTSE 250 after the oilfield services and engineering company said its board has decided to engage with Sidara on a sweetened takeover proposal.
Antofagasta was the top gainer on the FTSE 100 with a 2.5pc jump after the miner signed a $1.5bn (£1.2bn) investment deal to improve water supply at its Chile mining operations.
Vodafone Group and National Grid were the top losers on the benchmark index as it traded without entitlement to its latest dividend payouts.
Commodity giant Trafigura revealed its weakest half-year profit in four years amid calmer conditions for energy and metal markets after the shock caused by Russia’s war in Ukraine.
The Geneva-based private company’s net profit dropped to $1.5bn (£1.2bn) in the six months to March, which was down 73pc from £5.5bn during the same period the previous year.
Revenue fell 5.4pc to $124.2bn (£97.1bn), while group equity increased to $17.3bn.
Chief executive Jeremy Weir said: “In a less stressed environment than the same period a year ago, demand for our services remained strong and we recorded a net profit that was one of our best first half year results on record.”
Trafigura, which is owned by roughly 1,400 employee shareholders, declared $661.1m in dividends, down from a record $3bn a year earlier.
It has become one of the world’s leading suppliers of gas, oil refined products, plus metals and minerals.
The top competition enforcer in the US has said he will look “with urgency” at the artificial intelligence sector amid concerns that power over the sector is being controlled by a small group of wealthy actors.
Jonathan Kanter, the assistant attorney general for the Department of Justice Antitrust Division, told the Financial Times that he was examining “monopoly choke points and the competitive landscape” in AI.
He said that regulators are concerned that the AI sector is “at the high-water mark of competition, not the floor” and must act “with urgency” to make sure that dominant tech companies do not control the market.
The FTSE 100 edged higher at the open ahead of what is expected to be the first interest rate cut in the eurozone in five years.
The UK’s blue-chip stock index rose by 0.2pc to 8,259.68 while the midcap FTSE 250 gained 0.1pc to 20,698.37.
Outsourcing giant Mitie has reported record-high annual sales after it secured new projects with the Government and developed artificial intelligence-led security to combat retail crime.
The FTSE 250-listed company works with major companies in Britain and globally for services such as cleaning, security, engineering, and building work.
It said its revenues jumped by 11pc to £4.5bn over the year to the end of March, compared with £4.1bn generated the previous year.
This was driven by its work with the UK Government and technical services seeing double-digit sales growth, and a steady stream of business services contracts for cleaning and security.
US chip designer Nvidia became only the third US company to reach a market valuation of more than $3 trillion (£2.4 trillion) on Wednesday, overtaking Apple in the process to become the world’s second most valuable company.
All three major US indices finished the day in positive territory, with the broad-based S&P 500 and the tech-rich Nasdaq Composite hitting fresh records.
Nvidia’s shares jumped 5.2pc, propelling its market capitalisation to more than $3 trillion and overtaking Apple to become the world’s second largest company behind Microsoft.
Nvidia’s stock has surged 147pc so far in 2024, with demand for its processors far outstripping supply as Microsoft, Meta and Google-owner Alphabet race to build out their AI computing capabilities and dominate the emerging technology.
A review has been launched by the trade body which sets the global benchmark for gold prices after doubts were raised about the purity of some precious metals from a supplier.
The London Bullion Market Association (LBMA) said it is reviewing allegations involving Indonesian state miner Aneka Tambang (Antam) over the purity of its gold products.
Indonesia’s Attorney General Office has named six former general managers at Antam’s Precious Metal Processing and Refining Business Unit as suspects for alleged misuse of Antam’s stamping service.
Investigators said over the period of 2010-2021, the suspects oversaw production of around 109 tons of gold through the alleged illegal practice.
The investigators did not disclose from where the gold originated from or where it was distributed to after stamping.
Aneka Tambang last week denied there were 109 tons of counterfeit Antam gold circulating in the community in the period 2010-2021.
In a statement on May 31, the miner said: “All Antam precious metal gold products (are) derived with official certificates, and processed at the only gold processing and refining plant in Indonesia that has been certified by the London Bullion Market Association.”
LBMA, an industry body whose rules for gold refineries require that they source gold responsibly, said on Wednesday that an Incident Review Process (IRP) has been invoked to review the current circumstances, although it is difficult to commit to a timeline, given that process involves numerous stakeholders.
German factory orders declined in April, new data show, in a blow to the recovery of Europe’s largest economy from a downturn at the end of last year.
Manufacturers said incoming orders fell 0.2pc compared to the previous month, according to the Federal Statistical Office, which was below analyst estimates of a 0.6pc increase.
The March reading also was revised lower, now showing a 0.8pc decline, which was twice as bad as the initial reading.
The euro held steady ahead of the European Central Bank policy meeting where a rate cut is widely expected.
The single currency gained 0.1pc against the pound to be worth 85p, and was up 0.1pc against the dollar at $1.08.
Meanwhile, Asian shares gained amid the excitement over a first rate cut by the ECB since 2019, as well as rising expectations the US Federal Reserve will likely cut interest rates in September.
The shifting Fed expectations lifted oil prices and dragged Treasury yields to their lowest in two months, putting the dollar under pressure, after data this week hinted the US labour market was easing.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.3pc. The index was on course for a 2.8pc gain in the week and is set to snap its two-week losing streak.
The exuberance in markets looked set to continue in Europe. Eurostoxx 50 futures were 0.5pc higher, while the FTSE looks on track to gain 0.3pc ahead of the ECB policy meeting later today.
Thanks for joining me. Global stocks are rising ahead of an expected cut to interest rates by the European Central Bank today.
The FTSE 100 is on track to open higher following gains for Asian markets and Wall Street as central banks begin cutting rates after the inflation crisis around the world was brought under control.
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Asian markets rose after Wall Street hit records as the frenzy around artificial-intelligence technology kept sending stocks higher.
In Tokyo, the Nikkei 225 index climbed 0.9pc to 38,841.75. The Hang Seng in Hong Kong added 0.8pc to 18,569.48 and the Shanghai Composite index was up 0.1pc at 3,068.31.
It comes after the S&P 500 climbed 1.2pc on Wednesday to 5,354.03, hitting the top of its all-time high set two weeks ago.
The Nasdaq Composite jumped 2pc to 17,187.90 and likewise set a record. The Dow Jones Industrial Average, which has less of an emphasis on tech, lagged the market with a gain of 0.2pc to 38,807.33.
The rally sent the total market value of Nvidia, which has become the poster child of the AI boom, above $3 trillion for the first time, overtaking Apple as the world’s second largest company.
Nvidia is leading the way because its chips are powering much of the rush into AI, and it rose another 5.2pc to bring its gain for the year to more than 147pc.
Elsewhere, Australia’s S&P/ASX 200 gained 0.7pc to 7,824.40 after data from the Australian Bureau of Statistics showed the country’s trading surplus rebounded in April, with exports falling 2.5pc and imports dropping 7.2pc.
Taiwan’s Taiex surged 2pc after contract electronics maker Foxconn’s shares jumped 0.6pc after the company reported its revenue rose 22.1pc year-on-year in May, a record high for the month. In Bangkok, the SET was up 0.4pc.