Europe open: Stocks jump early as investors digest ECB comments

European stocks rose strongly on Friday as investors continued to digest comments from the European Central Bank, which indicated that a rate cut would be on the cards in the coming months.

The Stoxx 600 index was up 0.8% at 508.78 by 0937 CEST, with major indices across the continent putting in gains of between 0.6% and 0.9%.

"European stock markets rallied early Friday [...] as we start to see a more mixed outlook for global central banks," said Neil Wilson, chief market analyst at Finalto. "Whilst traders have pared bets for the Fed and Bank of England to cut rates, the ECB yesterday stuck to its guns and predicted a quarter point cut by June, with some even arguing for an immediate cut."

Rate-setters in Frankfurt stood pat on rates on Thursday, but said that it would be correct to lower interest rates if its next set of projections, in June, increased their confidence that inflation was headed lower. The Governing Council said gauges of underlying inflation were "easing" and wage increases "gradually moderating", it added.

In economic data, UK GDP grew 0.1% in February following 0.3% growth the month before, in line with consensus expectations. January’s figure was revised up from a previous estimate of 0.2%. growth. The figures suggested GDP did not contract in the quarter between January and March, raising hopes that a recession is over. This follows a contraction in the third and final quarters of 2023.

Meanwhile, German inflation fell in March, matching the lowest level since mid-2021, according to secondary estimates released on Friday. The annual rate of inflation was 2.3% last month, in line with the preliminary estimate and analysts' estimates. This was down from 2.7% in February and 3.1% in January, matching the same level as November, which was the lowest reading seen since June 2021.

Market movers

UK housebuilders were performing well, after positive broker commentary. JPMorgan said in a research note that it was taking a more positive stance on the sector this year, "as we see scope for likely positive sentiment/newsflow from the upcoming UK election (with housing expected to be a key focus) before positioning for a recovery in 2025E, likely aided by rate cuts".

Meanwhile, RBC Capital Markets upgraded its rating on Taylor Wimpey to 'outperform', saying the business "has the wind behind its sales, and we like the cut of its jib". Sector peers Redrow and Barratt Developments were also putting in decent gains.

French bank Societe Generale was a high riser, a day after announcing a deal to sell its professional equipment financing business to BPCE for €1.1bn.