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The European Central Bank (ECB) lowered interest rates for the third time this year, cutting its key deposit rate by 25 bps to 3.25%. The ECB said the move aims to curb potential for “downside surprises” in the eurozone economy. The move is the bank’s first back-to-back rate cut in 13 years, five weeks after a previous rate cut.
The context: Inflation dropped below the eurozone’s 2% target to 1.7% in September, its lowest level in three years.
REMEMBER- Central banks are pivoting toward cutting rates as inflation slows down, with the US Federal Reserve spearheading the global policy-easing cycle, cutting interest rates by half a percentage point in September.
The rate cut is expected to spur growth for the region by giving “a boost to the German [and wider eurozone] economy, inspiring consumer spending, encouraging investment, and ultimately stimulating the economy,” Joe Nellis, an adviser to the financial consultancy MHA, told The Guardian. Germany, the region’s largest economy, faces the risk of a second year of contraction.
If inflation remains on its downward slide, an aggressive cut could be on the table. “A 50 bps cut at the next meeting in December is a possibility if the two inflation and PMI prints of October and November continue to surprise on the downside,” said Douglas Lytle, an editor at Bloomberg Intelligence.
ECB president Christine Lagarde signaled that the bank is unlikely to stick to “a particular rate path,” only keeping rates “sufficiently restrictive for as long as necessary” to achieve its 2% target.
Some pundits concur, seeing as the ECB “will likely want to keep flexibility about a December cut and will push back against the idea that this is the start of consecutive cuts,” ING said in a note ahead of the decision.
ALSO WORTH NOTING-
- China’s economic growth weakens in 3Q: China’s economy grew by 4.6% y-o-y last quarter, falling short of the government’s 5% growth target, and hitting an 18-month low. (Financial Times)
- El Salvador secured a USD 1 bn refinancing loan from JPMorgan Chase, backed by the US Development Finance Corporation. (Financial Times)
- The IMF approved USD 340.7 mn for Ethiopia as part of a four-year USD 3.4 bn financing package, bringing total disbursements to date to USD 1.4 bn. (Bloomberg)
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TASI |
11,907 |
-1.1% (YTD: -0.5%) |
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MSCI Tadawul 30 |
1,490 |
-1.1% (YTD: -3.9%) |
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NomuC |
26,206 |
+0.9% (YTD: +6.8%) |
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USD : SAR (SAMA) |
USD 3.75 Sell |
USD 3.75 Buy |
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Interest rates |
5.5% repo |
5.0% reverse repo |
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EGX30 |
30,144 |
-1.3% (YTD: +21.1%) |
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ADX |
9,288 |
+0.1% (YTD: -3.0%) |
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DFM |
4,469 |
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S&P 500 |
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FTSE 100 |
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Euro Stoxx 50 |
4,986 |
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Brent crude |
USD 73.06 |
-1.9% |
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Natural gas (Nymex) |
USD 2.26 |
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Gold |
USD 2,730 |
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BTC |
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THE CLOSING BELL: TADAWUL-
The TASI fell 1.1% on Thursday on turnover of SAR 7.0 bn. The index is down -0.5% YTD.
In the green: Red Sea (+4.3%), Sidc (+.2.9%) and Tawuniya (+2.8%).
In the red: Al Baha (-6.9%), Artex (-4.9%) and Anaam Holding (-4.5%).
THE CLOSING BELL: NOMU-
The NomuC rose 0.9% on Thursday on turnover of SAR 112.9 mn. The index is up 6.8% YTD.
In the green: Al Dawliah (+13.3%), Knowledge Tower (+11.2%) and Al Babtain Food (+9.5%).
In the red: Al Qemam (-7.2%), Leaf (-6.8%) and Knowledgenet (-5.7%)
CORPORATE ACTIONS-
Mulkia Investment is distributing SAR 8.3 mn in dividends at SAR 0.08 apiece for unitholders of Mulkia Gulf Real Estate REIT for 3Q 2024, it said in a disclosure to Tadawul.
