Europe Markets: European markets keep climbing after dovish Fed

European markets continued to rally after the U.S. Federal Reserve indicated it was considering future rate cuts at its policy meeting Wednesday.

How did markets perform?

The Stoxx 600 SXXP, +0.62%  was 0.7% higher at 387.6, following Wednesday’s rally of 1.7%.

The U.K.’s FTSE 100 UKX, +0.62%  was up 0.6% to 7,452.5. On Wednesday the index closed 1.2% higher.

The pound GBPUSD, +0.3797%  was up 0.3% to $1.2682, more than erasing Wednesday’s gap down of 0.1%.

In Germany, the DAX DAX, +0.77%  rose 0.8% to 12,407, adding to Wednesday’s increase of 2%.

France’s CAC 40 PX1, +0.67%  climbed 0.7% to 5,556. It jumped 2.2% Wednesday.

Italy’s FTSE MIB I945, +0.80%  leapt ahead 0.8% to 21,391, after surging 2.5% Wednesday.

Oil prices rose as tensions in the Gulf continued to escalate. The West Texas Intermediate (WTI) crude oil benchmark CL.1, +4.22%  was up 3% to $55.37/bbl. while the Brent benchmark BRN.1, +3.24%  was 2.3% higher at $63.25/bbl.

What’s moving the markets?

The U.S. Federal Reserve did not cut rates, but it did signal that it was considering doing so at its policy rate announcement Wednesday, citing growing “uncertainties”. Various asset classes responded to the news, with U.S. equities rising, Treasury bond yields falling and gold reaching a five-year high.

Lee Ferridge, head of multi-asset strategy in the Americas at State Street Global Markets, said the current strong employment and inflation figures support the Fed’s decision not to cut rates: “Weak global economic data, falling inflation expectations and continued concerns over the trade war explain the Fed’s dovish stance. However, it has to be recognized that from a domestic standpoint it is hard to justify the three cuts that the market is pricing over the course of 2019.”

Iran claimed responsibility for shooting down a U.S. drone, which it said had entered Iranian airspace near the Strait of Hormuz. A U.S. spokesperson told the Associated Press there was “no drone over Iranian territory”. The disagreement is the latest in tensions between the two countries exacerbated by an incident where the U.S. accused Iran of having attacked two oil tankers near the Gulf of Oman. Iran denies involvement.

In economic data, U.K. retail sales in May disappointed. They rose 2.3% year over year, revised, versus 2.5% expected. The Bank of England left key interest rates unchanged at a meeting earlier Thursday, but said Brexit and global trade uncertainty was hanging over the U.K. economy.

Which stocks are active?

Novo Nordisk A/S NOVO.B, -0.98% was downgraded to hold by Deutsche Bank analysts, after the pharmaceutical major’s shares strengthened in June. Analyst Richard Parkes said the growth potential of the company was now fully priced in. On June 14, Novo Nordisk shares gained on news that U.S. rival Eli Lilly had presented disappointing data on a drug to compete with Novo’s diabetes treatment. Novo Nordisk shares fell 1.7% Thursday.

Delivery Hero SE DHER, +11.40%  shares jumped 8.7% as the company raised its revenue guidance for the full year, indicating that the second quarter has already outperformed the online food ordering company’s expectations. Delivery Hero increased its full year revenue guidance for 2019 by €200 million.

Shares in Dixons Carphone PLC DC, -9.67%  plummeted 12% after the electronics retailer reported disappointing fiscal 2019 earnings. The company’s pretax profit was down 22% year over year, to £298 million.

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