Europe’s Stoxx 600 index, which rose 1.5% on Thursday, gained a further 0.9% in early dealings on Friday. In London, the FTSE 100 rose 0.9%, buoyed by mining stocks.
“The key thing for markets is that a dovish hike suggests we are getting closer to the end,” said Parisha Saimbi, G10 FX rates strategist at BNP Paribas in London. “They are going to wait for the pass through of monetary policy so far, and to this extent equities are performing well.” But China’s central bank’s late on Thursday cut banks’ reserve ratio requirements for a second time this year, in a move designed to stimulate the economy by increasing the flow of credit to households and businesses.
“When you look at the tactical stimulus Chinese authorities are putting in place and the slight stabilisation of the economy, it gives you a reason to start feeling constructive,” said Florian Ielpo, head of macro at Lombard Odier Investment Management.