European stock market soars to new heights

European stocks achieved a new record, driven by the ongoing surge in technology shares and expectations of an interest rate cut from the European Central Bank (ECB) on Thursday.

The pan-European Stoxx 600 index increased by 0.7%, with the technology subindex climbing as much as 2.6%. This followed significant gains for major US tech companies. US equity futures also edged higher, suggesting another all-time peak for the S&P 500. In US premarket trading, Nvidia Corp. advanced nearly 2%, having surpassed $3 trillion in market capitalisation on Wednesday, making it the first computer chip company to reach this milestone.

Other US tech firms, such as Micron Technology Inc. and Advanced Micro Devices Inc., also saw rises in premarket trading. In Europe, ASML Holding NV and ASM International NV hit new record peaks. According to Matt Stucky, a senior portfolio manager at Northwestern Mutual Wealth Management, technology continues to lead market optimism, with earnings revisions favouring tech and reflecting in stock market leadership.

Investor confidence is growing that central banks across the developed world will be able to ease monetary policy this year. The ECB is expected to announce a 25 basis-point cut on Thursday, following the Bank of Canada’s initiation of its cutting cycle and hints at further easing. Traders are also beginning to anticipate more Federal Reserve easing this year. Stucky noted that with the Bank of Canada’s rate cut and the expected ECB action, momentum is building behind a coordinated global easing cycle.

Bond yields across Europe increased ahead of the ECB meeting, as traders awaited more guidance on the future of additional easing from ECB President Christine Lagarde. Bets on further ECB cuts have become more cautious following data indicating stronger-than-expected economic growth, inflation, and wage increases.

In the US, Treasury yields also edged higher after falling in the previous session, with markets almost fully pricing in two Fed rate cuts in 2024. A private payrolls report on Wednesday showed that hiring at companies grew at the slowest pace since the beginning of 2024, while the services sector expanded at the fastest rate in nine months. The key monthly payrolls data, due on Friday, is expected to show an uptick in job creation for May following April’s unexpectedly weak figure.

In Asia, stocks rose for the first time in three days. Indian equities extended gains after Prime Minister Narendra Modi secured crucial backing from two key allies in his coalition. Taiwan Semiconductor Manufacturing Co. surged as much as 7.4% to a new record high after the chip giant announced a share buyback.

In the commodities market, oil prices rose for a second session. Industrial metals also saw gains, with copper leading the rally, and zinc and nickel prices increasing.

Fidelity European Trust PLC (LON:FEV) aims to be the cornerstone long-term investment of choice for those seeking European exposure across market cycles.

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