Global Stock Markets Rise After ECB Rate Cut

Last week, global stock prices surged on the world’s exchanges, thanks to the European Central Bank’s rate cut and positive macroeconomic data, leading to new record levels for the Dow Jones and S&P indices on Wall Street.

The Dow Jones strengthened by 1.8 percent last week, reaching 14,973 points, while the S&P 500 index rose by 2 percent to 1,614 points, marking their highest levels in history. The Nasdaq index, on the other hand, jumped by 3 percent to 3,378 points.

The historic breakthrough of the S&P index above the 1,600-point level is primarily attributed to the fact that 165,000 new jobs were created in the U.S. in April, 20,000 more than expected, indicating a recovery in the labor market. Meanwhile, the unemployment rate slipped from 7.6 to 7.5 percent, the lowest level in four years.

– “The employment figures support investors’ risk appetite, which has driven up stock prices for companies sensitive to economic growth,” says Dan Veru, director at Palisade Capital Management.

Investors were also buoyed on Thursday by the European Central Bank, which cut the key interest rate by 0.25 percentage points to a record low of 0.50 percent, signaling that further measures could be taken to pull the eurozone out of recession.

The ECB’s measures followed the decision by the U.S. Federal Reserve the day before to continue purchasing government and mortgage-backed securities at a rate of $85 billion per month to maintain low interest rates and stimulate economic growth.

– “This shows that central banks are determined to keep the system stable and to further stimulate the economy if necessary, which has a calming effect on the market,” says Weyman Gong, a strategist at Signature. The continuation of a series of solid quarterly earnings reports from companies has also positively impacted the market.

So far, 404 companies in the S&P 500 index have released financial reports, with 68.3 percent exceeding analysts’ earnings expectations, while only 46.3 percent achieved higher revenues than estimated.

– “This earnings season is characterized by slow revenue growth, making organic growth for companies challenging. Larger companies are likely to opt for ‘buying growth,’ so we can expect acquisitions of mid-sized and small firms in the coming period, which is positive for the stock market,” says Veru.

Stock prices also rose on European exchanges last week. The London FTSE index strengthened by 1.5 percent to 6,521 points, while the Frankfurt DAX jumped by 3.9 percent to 8,122 points, and the Paris CAC rose by 2.7 percent to 3,912 points. In Tokyo, however, the Nikkei index weakened by 1.4 percent to 13,694 points.