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FTSE, European stocks and Wall Street climb as ECB hikes interest rates

A look at how the major markets are performing on Thursday

200309 -- LONDON, March 9, 2020 Xinhua -- A man stands outside the London Stock Exchange in London, Britain, on March 9, 2020. British stocks decreased on Monday, with the benchmark FTSE 100 Index down by 7.69 percent, or 496.78 points, to close at 5,965.77 points. Photo by Tim Ireland/Xinhua BRITAIN-LONDON-STOCKS PUBLICATIONxNOTxINxCHN
The FTSE is higher today. Photo: Tim Ireland/Xinhua (Amadeja Plankl, Imago)

The FTSE 100 (^FTSE) and European stock markets were higher on Thursday as traders digested news that the European Central Bank (ECB) had raised the three key interest rates by 25 basis points.

The move, which was expected by financial markets, means rates are now at the highest level since the euro was launched in 1999.

London's benchmark index rose 2% on the day, while the CAC (^FCHI) was 1.3% higher in Paris, and the Frankfurt DAX (^GDAXI) had gained 1%.

"Inflation continues to decline but is still expected to remain too high for too long," the ECB said on Thursday.

Read more: ECB hikes interest rates to record 4% and increases inflation forecast

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Christine Lagarde also warned that domestic price pressures remain strong in the eurozone, with measures of longer term inflation expectations standing around 2%.

She added that the risks to the economy are “tilted to the downside,” as the outlook for demand in China remains uncertain.

The ECB also lifted its inflation forecasts for 2023, and next year, while cutting its forecast for 2025 to from 2.2% to 2.1%.

Mike Bell, global liquidity market strategist at JP Morgan Asset Management, said: “With the business surveys indicating an imminent sharp slowdown in growth, the ECB are probably done hiking.

“The new orders component of the latest business surveys were very weak. Incoming new business for the service sector is contracting now, joining new orders for the manufacturing sector in the doldrums."

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It comes as data showed last night that the annual rise in underlying US inflation was the smallest in nearly two years, as consumer prices increased by the most in 14 months in August.

The S&P 500 (^GSPC) was 0.6% higher by the time of the European close and the tech-heavy Nasdaq (^IXIC) was also 0.6% up. The Dow Jones (^DJI) was 0.7% down in New York.

Watch: How does inflation affect interest rates?

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