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Tech rebound leads stocks higher ahead of ECB rate cut

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Expectations of 25 basis point cut pin down borrowing

costs

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Oil rebounds from near 3-year low

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Copper on course for best session since July

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, Sept 12 (Reuters) - Share markets enjoyed a

fourth straight day of gains on Thursday as the prospect of

another ECB rate cut pinned shorter-term euro zone borrowing

costs near to their lowest level since the end of 2022, and the

euro to a 4-month nadir.

An overnight rally in supersized U.S. tech stocks and a

rebound in commodity markets was also helping the mood, but

focus was rapidly gravitating towards what message ECB chief

Christine Lagarde sends from Frankfurt later.

The central bank's second quarter-point rate cut of the

cycle is almost certain, but how hard and fast it moves for the

rest of the year still seems up in the air and this meeting will

throw new ECB staff forecasts into the mix.

Chief European Economist at BNP Paribas Paul Hollingsworth

said new inflation projections might actually come in higher

than the last set in June, although they will have been

finalised before this month's dive in oil prices.

"We think that this will translate into a message of

gradualism," he said, adding that even if Lagarde does not

completely rule out a follow-up cut in October, it does not look

likely for now.

Markets currently expect rates to drop to around 2% over the

next 12-18 months. "But if we are right on the base case, the

market is probably pricing in too many cuts."

European shares, which have not enjoyed the same strength of

rebound this week as other parts of the world, were up a solid

1% with tech stocks jumping 2.5% after Magnificent 7 powerhouse

Nvidia ( NVDA ) had surged on Wall Street on Wednesday.

The euro and sterling were hovering at just above $1.10

and $1.30 respectively, while ECB-sensitive 2-year

German government bond yields bobbed at 2.18% having just

dropped to their lowest level since December 2022.

Overnight, MSCI's broadest index of Asia-Pacific shares

outside Japan had rallied 1.5%. The Nikkei

jumped 3.3%, helped by a weaker yen, which pulled back

from its 2024 high of 140.71 per dollar.

The dollar was last up another 0.2% to 142.57 yen,

having been pressured earlier by hawkish comments from a senior

Bank of Japan official who called for raising rates at least to

1%.

U.S. data on Wednesday meanwhile showed core consumer price

index (CPI) rose 0.28% in August, compared with forecasts for a

rise of 0.2%. It was enough of a steer for markets to almost

abandon the chance of a half-point rate cut from the Federal

Reserve next week, with probability for such a move at just 15%.

"We wanted answers to help settle the 25bp vs 50bp Fed rate

cut debate on Friday, but now it seems the market has made its

own mind up," said Chris Weston, head of research at

Pepperstone, referring to the mixed August payrolls report last

Friday.

"We are now comfortable with calling a 25bp cut for

September, but also open-minded to the idea that a weak U.S.

payrolls report on 4 October would fully open up a 50bp cut in

the November FOMC meeting."

TECH REBOOT

The disappointment over core inflation figures had pressured

Wall Street but again tech stocks came to the rescue, with AI

darling Nvidia ( NVDA ) jumping 8%, helped by a media report

that the U.S. government is considering letting the company

export advanced chips to Saudi Arabia.

Regional tech-heavy share markets in Asia followed suit,

with Taiwan adding 2.8% and South Korea gaining

1.7%.

Back in the rates markets, 2-year Treasury yields

edged up 1 basis point to 3.66%, having risen 4 basis points

overnight, while 10-year yields were at 3.6665%.

That left the 2-10-year yield curve flattening slightly and

barely remaining positive at less than 1 bp.

Oil extended gains on fears that Hurricane Francine could

lead to lengthy production shutdowns in the U.S.

Brent crude futures, which hit their lowest in

almost three years earlier this week, rose over 1% to $71.40 a

barrel, after gaining 2% overnight.

Industrial bellwether metal copper was having its best day

since July thanks to a 2% rally while gold was 0.2%

stronger at $2,517 an ounce, just a touch below its record high

of $2,531.60.