'Dovish' ECB hike hits euro, boosts stocks

LONDON — Eurozone stocks jumped and the euro slid on Thursday after the European Central Bank signalled its latest interest-rate hike might be its last.

Wall Street rose as shares in chip designer Arm were set to begin trading.

The ECB opted for another interest rate hike of 0.25 percentage points on Thursday, taking the closely-watched deposit rate to its highest level since the introduction of the euro in 1999, as it tries to rein in inflation.

It defied calls for a pause to take pressure off the faltering eurozone economy, even as it cut growth forecasts.

While the ECB bumped up its inflation forecasts for 2023 and 2024 due to higher energy prices, it sees inflation falling to a near target level of 2.1 per cent in 2025.

The central bank's Governing Council said it "considers that the key ECB interest rates have reached levels" that over time should make a "substantial contribution" to returning inflation to its target level of 2 per cent.

"This is a clear and deliberate signal to the market that the ECB thinks it is done for now and we have reached the peak in rates," said Neil Wilson, chief market analyst Finalto.

The euro traded lower against the dollar due to the "dovish hike", he added.

The euro, which stood around $1.0728 before the announcement, slid under $1.07. Eurozone stocks, which were lower beforehand, bounced higher. 

Other analysts were not so categorical that the ECB was done with hiking rates.

"A lingering pause is being signalled, but it's a low conviction pause," said Mark Wall, chief European economist at Deutsche Bank Research.

"The ECB has retained the option to hike further if necessary," he added.

Eurozone stocks gave up part of the gains after ECB chief Christine Lagarde said: "We can't say that now we are at peak" interest rates.

On Wall Street, stocks rose at the start of trading as investors shrugged off data showing that higher energy prices were affecting wholesale prices and retail sales.

The Dow climbed 0.6 per cent.

Crude prices remain elevated, sitting at 10-month highs, with some analysts warning they could break back to $100 per barrel.

On the corporate front, shares in British chip designer Arm, were set to start of trading on the Nasdaq in the largest initial public offering (IPO) New York has seen for almost two years.

Arm, whose semiconductor designs are integrated into the vast majority of smartphones worldwide, had priced its shares at $51, targeting a valuation of more than $52 billion for its IPO on the Nasdaq exchange. 

The company, which is a world leader in smartphone chip design and is owned by the Japanese tech investor SoftBank, is trading on the tech-rich Nasdaq stock exchange under the "ARM" ticker.