European Stocks Extend Rebound

European stocks closed firmly higher on Thursday, tracking the positive momentum for stocks worldwide after a pullback in oil and gas prices softened the elevated level for sovereign yields. The Euro STOXX 50 gained 0.9% to 6,323 and the STOXX Europe 600 rose 0.9% to 643. Natural gas benchmarks in the continent and wholesale fuel costs eased after Saudi Arabia signaled its East-West pipeline could return to operation shortly, softening risks of even more aggressive inflation in the Eurozone. Meanwhile, the Fed raised its rates by 25bps, as expected, but the hawkish tone in Chairman Warsh's remarks flattened yield curves across economies with exposure to US credit, also softening long borrowing costs. Banks closed higher, with Santander, BBVA, and Deutsche Bank adding close to 2%. Power-hungry industrials also gained, with Siemens Energy, Schneider, and Siemens jumping between 3.5% and 2.5%.

European stocks moved higher on Thursday, with both the STOXX 50 and STOXX 600 gaining 0.7%, tracking a broader global rally after the Fed raised interest rates by 25bps, as expected, and signalled at least one further hike this year. Chair Warsh also reaffirmed the central bank’s commitment to tackling inflation, helping to restore investor confidence in its policy stance. Bond yields retreated and oil prices edged lower, providing additional relief to market sentiment. Meanwhile, US President Trump threatened to impose tariffs on the EU, or potentially halt trade with the bloc altogether, if it proceeds with its plan to make Canada its first-ever “associate member”. The auto sector was among the top performers, led by Stellantis (+2.5%), Renault (+2.1%) and BMW (1.9%), while tech stocks also advanced, with ASML gaining 2%. Sodexo surged nearly 4% after JPMorgan upgraded the stock to “overweight” from “neutral”.

European equity markets were set for a higher open on Thursday after the US Federal Reserve delivered a widely anticipated interest rate hike, although the central bank signaled that further tightening may be needed to contain inflation. Stocks also gained support from lower oil prices, which eased concerns over inflation, following reports that Saudi Arabia aims to restore around half of its East-West pipeline capacity within days and return the system to full operation within six weeks. Meanwhile, investors awaited the Bank of England’s policy decision, with rates widely expected to remain unchanged, though policymakers could signal a potential move later this year amid rising energy costs. Final Eurozone inflation figures for August will also draw attention, while no major corporate earnings are scheduled for release in Europe today. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both up around 0.2%.