Euro stock ETFs jump after Bank of England rate talk

Investors flocked to exchange-traded funds that track European stocks after the Bank of England dangled a carrot on the timing of future rate cuts while making no change at Thursday’s meeting. 

"We need to see more evidence that inflation will stay low before we can cut interest rates, but I am optimistic things are moving in the right direction," said Bank of England President Andrew Bailey. 

The iShares MSCI Eurozone ETF jumped, hovering at the highest level since June 2008, capping a sixth consecutive day of gains, as tracked by Dow Jones Market Data Group. 

The fund tracks mid- and large-sized equities that use the euro as their official currency, according to iShares. Top holdings include luxury company LVMH, software firm SAP and oil giant TotalEnergies.

The euro-focused ETF has gained 8% this year. 

Additionally, the SPDR Euro Stoxx 50 ETF is also pacing for its best day since June 2008, while the Vanguard FTSE Europe ETF is eyeing the highest close since January 2022. 

In the U.K., the annual consumer price index inflation fell to 3.2% in March, down from about 10% a year ago, according to Bailey, but it still remains above the 2% inflation target — the same as the U.S.

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Like Bailey, Federal Reserve Chairman Jerome Powell is also trying to hose inflation down to a point where a rate cut would be appropriate, but it's been a tougher slog with inflation sitting at 3.5%. 

FED CHAIRMAN JEROME POWELL STILL DOGGED BY INFLATION

"Readings on inflation have come in above expectations," Powell told reporters at a press conference in Washington, D.C., after the May meeting. "It is likely that gaining such greater confidence will take longer than previously expected." 

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Investors are now predicting the first rate cut will come in September, according to the CME’s FedWatch Tool, which tracks the probability of rate moves.