Economy

(Reuters) -European stocks held on to their gains on Thursday, after the European Central Bank delivered a widely expected 25-basis-point rate cut, even though it refrained from offering new clues about its next move.The continent-wide STOXX 600 index was up 0.7% at 1225 GMT, following a two-day decline.The ECB reduced its interest rates by 25 bps, following a similar-sized cut in September, which marked its first back-to-back rate cuts in 13 years. However, the central bank did not provide any indication about future moves in its statement and instead repeated its mantra that decisions will be data-dependent.This came in the face of money markets’ expectations of three further reductions through March 2025. Inflation in the euro zone is now increasingly under control and the economic outlook has worsened.”The outlook is pretty clear as well… With the growth so slow in Europe and inflation back to target, it would be a surprise if they didn’t continue to cut,” Robert Farago, head of head of strategic asset allocation at Hargreaves Landsdown said.Investor sentiment was already upbeat on the back of a slew of robust corporate earnings ahead of the monetary policy verdict.Finnish bank Nordea rose 6%, supporting a more than 1% rise in the bank index, after raising its forecast and announcing a new share buyback programme.Germany’s Sartorius rose 16%, topping the STOXX 600, after the pharmaceutical equipment supplier’s better-than-expected bio-processing order intake boosted its nine-month results.British pest control company Rentokil Initial rose 9% on plans to expand initiatives to increase organic growth in North America following higher group revenue growth.On the flip side, Mondi (LON:MNDI) dropped 6.5% after the British packaging company reported a lower third-quarter core profit, while Nokia (HE:NOKIA) fell 4.2% after its quarterly sales missed estimates. More

The ECB cut its deposit rate by 25 basis points to 3.25% as forecast in a Reuters poll of analysts, in a tacit acknowledgement that inflation, now below 2%, could settle around its 2% target quicker than previously thought.But the bank gave no new clues about its next move, even if markets expect similar cuts at each of its next three meetings, taking the rate from a level where it restricts growth to at least a neutral setting by the end of next year.”The incoming information on inflation shows that the disinflationary process is well on track,” the ECB said in a statement. “The inflation outlook is also affected by recent downside surprises in indicators of economic activity.” A cut was widely expected after policymakers made the case for quicker policy easing in the run-up to the meeting on a series of weak growth readings and benign inflation data.Poor sentiment indicators, weak consumer spending and a prolonged industrial recession suggest that the bloc is barely growing, which will put downward pressure on inflation, which slowed to 1.7% last month, its lowest level in three years.”Domestic inflation remains high, as wages are still rising at an elevated pace. At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation,” the ECB added.But policy hawks are still likely to oppose quick rate cuts given that inflation could tick up in the coming months. The labour market remains tight, unions continue to demand big wage increases, energy costs are volatile and services prices are still rising quickly, all of which suggests domestic inflation could remain relatively high for some time to come. However, doves argue that growth is now so weak that unless the ECB acted quickly to shore up the bloc, inflation could actually fall below target and the ECB would have to go from fighting rapid price growth to excessively low inflation. This debate is unlikely to have been settled on Thursday so ECB President Christine Lagarde may well offer no commitments and few clues about any future policy moves at her 1245 GMT news conference. More

It is the first back-to-back borrowing cost drawdown in 13 years, and serves as a sign that the ECB has begun to pivot away from a period of interest rate hikes designed to quell elevated price growth.Instead, the ECB has signaled that it is refocusing policy on trying to reinvigorate a sputtering Eurozone economy that has struggled to keep pace with the US for much of the last two years.Business activity and sentiment surveys out of the region undershot estimates in September. Meanwhile, an updated inflation reading released ahead of the ECB’s announcement showed that headline consumer price growth decelerated to an annualized 1.7% last month. The mark, which was initially 1.8%, is below the central bank’s stated 2% target.”The incoming information on inflation shows that the disinflationary process is well on track. The inflation outlook is also affected by recent downside surprises in indicators of economic activity,” the ECB said in a statement.The 25-basis point cut brings the rate the ECB pays out to banks for their deposits to 3.25%, widening the gap compared to the Federal Reserve. The US central bank lowered its target rate by an outsized 50 basis points last month to a range of 4.75% to 5.00%.Meanwhile, policymakers chose to avoid laying out specific policy guidance, reiterating that it is not “pre-committing to a particular rate path” and would roll out future decisions based on its “assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission.”The stance was “sensible” given the uncertainties that face the Eurozone economy, according to Mark Wall, Chief European Economist at Deutsche Bank.However, Wall added: “[C]hances are that today’s decision represents a pivot point into a faster normalisation of monetary policy.”In a note to clients, analysts at Capital Economics said they anticipate that upcoming economic data will support quarter-point cuts at “each of the next few meetings, at the very least.”Following the ECB’s announcement, which had been widely anticipated by markets, the euro was trading roughly unchanged versus the dollar. More

LONDON (Reuters) -UniCredit is still awaiting a court decision over whether it must immediately reduce its Russia business to comply with a European Central Bank order, months after filing an objection, people familiar with the situation told Reuters.The near four-month wait for a decision increases pressure on the lender to show it is complying with the ECB’s requests, whose deadlines have already passed. The ECB, the lender’s chief supervisor, instructed UniCredit at the end of April to scale down its business in Russia including imposing a ban on new deposits and restrictions on handling payments.In June, the Milan-based bank asked the European Union General Court to annul the demands, which Chief Executive Officer Andrea Orcel has said could breach Russian laws. UniCredit has also sought to have the measure suspended while the court proceeding is pending, and in July said that a decision on a suspension was expected “in the coming months”.Representatives for UniCredit, ECB and the European court declined to comment for this article. UniCredit has said it “will continue to act on its commitment to significantly reduce its presence in Russia” and in July reiterated its 2025 targets to scale down its business there.According to a summary of the court case which has not been previously reported, UniCredit asked the judge to annul all of the ECB’s demands or, alternatively, the orders regarding loans, deposits and payments. The ECB prohibited UniCredit from granting new loans or rolling over existing loans and imposed a ban on taking new term deposits from June 1, according to the court filings.UniCredit is also contesting the ECB request to impose restrictions on payments with Russian clients in certain foreign currencies as of Sept. 1, with the exception of “whitelisted” clients.Reuters could not establish which white list the ECB is referring to and whether UniCredit has complied with the ECB requests. UniCredit said in a presentation to investors at the end of July that the bank aimed to reduce cross-border payments to below 8.5 billion euros ($9.3 billion) and local deposits under 2 billion by 2025.The Italian lender had approached Abu Dhabi’s Mubadala Investment over a year ago to explore a sale of its Russian business, according to a person with knowledge of the matter, but the $302 billion fund didn’t pursue it. A spokesperson for UniCredit did not immediately comment. Bloomberg News earlier reported UniCredit’s approach to Mubadala.”UniCredit is in a difficult position,” said Laura Brank, partner at law firm Dechert, who has been advising Western firms including banks on the sale of their Russian subsidiaries.”It’s a very delicate balance, the idea of slowly winding down the business is probably the easiest thing to do right now, as opposed to just exit.” RUSSIA TIESThe legal battle with the regulator comes as UniCredit is seeking the ECB’s approval to increase its stake in Germany’s Commerzbank (ETR:CBKG). While the ECB has talked favourably about bank mergers in Europe, the Italian bank is facing hurdles in Germany, Reuters reported.The ECB assesses purchases of bank stakes based on a handful of criteria such as the financial strength of the buyer and the reputation of the proposed acquirer, including court proceedings.The regulator will also scrutinize whether the purchase increases risk of money laundering and financing terrorism, as expected under the ECB’s guidelines.UniCredit’s ties to Russia date back to International Moscow Bank, the first Russian lender to raise funds from foreign banking institutions.Following changes in ownership, it was renamed AO UniCredit Bank and in 2015 was included in the list of systemically important banks by the Bank of Russia.When Russia invaded Ukraine in 2022, UniCredit remained in Russia, being one of two European banks – along with Austria’s Raiffeisen – to maintain large operations in the country. ($1 = 0.9190 euros) More

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