Global stocks rose on Thursday as bets grew that major central banks would soon cut interest rates, with the Federal Reserve seen as a strong possibility.
The UK’s FTSE 100 rose 0.7%, the German DAX added 0.5% and France’s CAC 40 gained 0.6%.
Equity markets have been rallying in recent days as investors bet that central banks will soon reverse course and cut rates after raising them aggressively to combat inflation.
The prospect of lower borrowing costs has been particularly supportive for technology and growth stocks, which had been hit hard by the recent market sell-off.
On Wednesday, the US Federal Reserve announced that it will start winding down its bond-buying program in June, a step that is seen as a precursor to a rate cut.
The Fed’s decision has been followed by similar moves from the Bank of England and the Reserve Bank of Australia.
Investors are now looking to the European Central Bank for clues as to when it will start easing monetary policy.
The ECB has so far resisted calls to cut rates, but there are growing expectations that it will do so in the coming months.
“The market is looking for more clarity from the ECB,” said Michael Hewson, chief market analyst at CMC Markets UK.
“If the ECB can provide some certainty about its plans, then we could see further gains in equity markets.”
However, Hewson warned that there are still risks to the outlook, including the war in Ukraine and the ongoing slowdown in China.
“While the market is enjoying a relief rally, there are still plenty of headwinds to contend with,” he said.
“We are still in a period of heightened uncertainty, and investors need to be prepared for more volatility.”