European stocks advanced Thursday, pricing in the positive reaction to the Federal Reserve interest-rate decision ahead of gatherings of both the European Central Bank and the Bank of England.
The Fed on Wednesday, after European markets had closed, doubled the pace of the taper and projected more interest-rate hikes in 2022 and 2023 than anticipated.
“With no clear evidence as to why this happened, we can only assume that it may have been a position-covering move as the market as a whole was long dollars and short equities heading into the decision. Perhaps some participants may have been expecting to lock profits after a potentially more hawkish Fed,” said Charalambos Pissouros, head of research at JFD Group.
Expectations are that the Bank of England will opt not to hike interest rates, and instead wait until February, after the U.K. recommended workers stay at home in response to the omicron variant of coronavirus. The European Central Bank is expected to reiterate the Pandemic Emergency Purchase Programme will end in March as planned, and could announce a separate program, the Asset Purchase Programme, may at least temporarily take on those bond purchases.
“The ECB may just emphasise its intention to maintain flexibility while leaving precise decisions about the score of such flexibility to its sessions in February or March 2022,” said Salomon Fieldler, an economist at Berenberg Bank.