On October 29, European stocks broadly rose, with the pan-European STOXX 600 index gaining 1% to hit its highest level since September 8, marking its largest single-day gain in over a month.
The German DAX index climbed 1.3%, the French CAC 40 index advanced 1.23%, and the UK FTSE 100 index rose 0.7%.
The rally followed the European Central Bank's decision to keep its benchmark rate unchanged, which eased some of the upward pressure on government bond yields in several European countries. Strong earnings reports from major corporations including Shell and Adidas also boosted European equities.
ECB Keeps Rate at 2.50%, Acknowledges Tighter Financing Conditions
The European Central Bank announced on October 29 that it would keep its deposit facility rate at 2.50%, pausing further monetary tightening after rate hikes in June and September of this year.
In its policy statement, the central bank noted that persistently rising energy prices have increased the risks of upward inflation and slower economic growth, but underlying inflation has generally remained stable, and the full impact of the energy price shock on the economy is still gradually unfolding.
Notably, the ECB acknowledged that financing conditions in the eurozone have tightened since its last meeting. This remark drew market attention, as government bond yields in several European countries have risen significantly in recent weeks, with the French bond market coming under particular pressure.
The ECB's attention to changes in the financing environment has somewhat alleviated investor concerns about further monetary policy tightening.
Shell and Adidas Earnings Lift Market, Some Tech Stocks Under Pressure
On the corporate earnings front, the energy and consumer sectors became the main drivers of the European stock rally. Energy giant Shell reported third-quarter net profit that exceeded market expectations, pushing its shares up 2.6%. German sportswear maker Adidas posted a record-high third-quarter operating profit and raised its full-year earnings guidance, sending its shares up 2.5%.
However, some tech stocks showed weakness. European chipmaker STMicroelectronics saw its shares fall about 2% despite reporting third-quarter operating profit that beat market expectations. Meanwhile, Google parent company Alphabet's announcement of heavy AI capital expenditure once again raised investor concerns about returns on artificial intelligence investments, weighing on global tech stock sentiment.
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