ECB Rate Decision
The European Central Bank increased its key deposit rate by 25 basis points to 2.25%, its first hike in almost three years, aiming to curb inflation that remains above 3% across the euro area. The ECB also revised its baseline inflation forecasts, expecting price growth of 3% in 2024, easing to 2.3% in 2027 and reaching the 2% target in 2028.
Market Reaction
By 13:30 GMT (09:30 ET) the pan‑European STOXX 600 index was up 0.7%, recovering from a three‑week low recorded the previous session. The UK FTSE 100 rose 0.9% after touching its lowest level since late March, while Germany’s DAX was flat and Italy’s FTSE MIB gained 1.3%, nearing record highs.
Sector Highlights
- Technology stocks lagged the broader market after Oracle announced aggressive capital‑spending plans, prompting valuation reassessments; SAP SE and Capgemini SE each fell 5.2%.
- Hugo Boss AG surged 10% following Frasers Group PLC’s €2 billion takeover offer for the German fashion brand; Frasers Group itself rose 2.7%.
- Wizz Air Holdings PLC climbed roughly 4.5% after reporting annual profit that beat estimates.
Geopolitical Developments
President Donald Trump warned that the United States would hit Iran “very hard tonight” and target the strategic Kharg Island in the near future. The remarks heightened war jitters, causing U.S. futures to dip, the dollar to firm 0.2%, and oil prices to tick higher.
Commentary
Jack Allen‑Reynolds, deputy chief eurozone economist at Capital Economics, noted that the rate hike had been clearly signalled in advance, but downside growth risks and upside inflation risks remain. Daniela Hathorn, senior market analyst at Capital.com, said the “buy the dip” narrative persisted, with the ECB appearing more willing to risk overtightening than lose control of inflation expectations.