European stocks rise after ECB holds deposit rate at 2.5%

European equity benchmarks finished firmer on Thursday, October 29, after the European Central Bank kept its deposit rate at 2.50%, main refinancing rate at 2.65% and marginal lending rate at 2.90%, a news report said.

The FTSE 100 added 27.57 points, or 0.3%, to 10,722.07 in London, while Paris’s CAC 40 rose 1.1% and Frankfurt’s DAX 40 gained 1.3%. The European moves contrasted with New York trading at the London close, where the Dow Jones Industrial Average and S&P 500 were each down 0.3% and the Nasdaq Composite slid 1.3%.

The ECB’s statement tied the hold to a more difficult inflation backdrop. “Energy prices have continued to rise, posing upside risks to the inflation outlook and downside risks to the growth outlook,” the central bank said.

London’s broader market also advanced, with the FTSE 250 up 34.90 points, or 0.1%, at 24,674.16 and the AIM all-share up 2.53 points, or 0.3%, at 763.45. The euro firmed to $1.1162 from $1.1148 on Wednesday, while sterling rose to $1.3369 from $1.3310.

The rate decision came on the same day ECB President Christine Lagarde said she would leave on February 7 2027, eight months before her term was due to end in October 2027. Atlas360 reported on October 29 that European Council President Antonio Costa said the replacement process would start without delay.

JPMorgan analyst Greg Fuzesi said in a note cited by the Evening Standard that the ECB decision had been expected by financial markets, with investors looking for an increase in December. He said Lagarde indicated officials had discussed a hike at Thursday’s meeting and added: “A hike in December therefore remains very likely and we continue to expect at least one further hike after that, most likely in March.”

The Federal Reserve also left interest rates unchanged on Wednesday despite faster inflation, according to the report. Fed Chairman Kevin Warsh told reporters the hold was the “right policy decision for this moment” and said the US central bank “will deliver price stability, no ifs, no buts”.

US inflation data on Thursday showed the personal consumption expenditures price index, an inflation gauge, rose 3.6% in September from 3.4% in August, matching a forecast cited by FXStreet. Core PCE, which strips out food and energy and is the Fed’s preferred inflation measure, quickened to 3.1% from 3.0%.

Morgan Stanley analysts cited by the report expect two further 25-basis-point increases, each equal to a quarter percentage point, in December and March, taking the terminal range to 4.25% to 4.5%. Eric Winograd, chief US economist at AllianceBernstein, said he was “struck” by the gap between Warsh’s anti-inflation rhetoric and the committee’s decision to wait.

Company news drove large single-stock moves. WPP rose 5.4% after reiterating annual guidance, Shell gained 2.1% after adjusted earnings beat a Vara consensus, and Haleon fell 15% after cutting its 2026 organic revenue growth outlook to about 2.5% from a previous 3% to 5% range.

Friday’s calendar includes third-quarter results from NatWest, BP and AstraZeneca, plus an interest-rate decision in Japan, inflation figures from France and Germany, Canadian GDP data and the Chicago PMI.

Source: news report, Evening Standard, October 29