Share markets have enjoyed a fourth straight day of gains as the prospect of another European rate cut pinned shorter-term euro zone borrowing costs near to their lowest level since the end of 2022, and the euro to a four-month nadir.

An overnight rally in supersized US tech stocks and a rebound in commodity markets was also helping the mood on Thursday, but focus was rapidly gravitating towards what message European Central Bank 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.

The 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 would have been finalised before September’s dive in oil prices.

“We think that this will translate into a message of gradualism,” he said, adding that even if Lagarde did not completely rule out a follow-up cut in October, it did not look likely for now.

Markets expect rates to drop to about two per cent during the next 12-18 months. 

European shares, which have not enjoyed the same strength of rebound this week as other parts of the world, were up a solid one per cent with tech stocks jumping 2.5 per cent after Magnificent 7 powerhouse Nvidia had surged on Wall Street on Wednesday.

The euro and sterling were hovering at just above $US1.10 and $US1.30 respectively, while ECB-sensitive two-year German government bond yields bobbed at 2.18 per cent after dropping to their lowest level since December 2022.

MSCI’s broadest index of Asia-Pacific shares outside Japan rallied 1.5 per cent.

The Nikkei jumped 3.3 per cent, 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 per cent 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 one per cent.

US data on Wednesday showed core consumer price index rose 0.28 per cent in August, compared with forecasts for a rise of 0.2 per cent. 

It was enough for markets to almost abandon the chance of a half-point rate cut from the Federal Reserve next week.

The disappointment over core inflation figures had pressured Wall Street but again tech stocks came to the rescue, with AI darling Nvidia jumping eight per cent, helped by reports the US 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 per cent and South Korea gaining 1.7 per cent.

In the rates markets, two-year Treasury yields edged up one basis point to 3.66 per cent, having risen four points overnight, while 10-year yields were at 3.6665 per cent.

Oil extended gains on fears that Hurricane Francine could lead to lengthy production shutdowns in the US.

Brent crude futures rose more than one per cent to $US71.40 a barrel after gaining two per cent overnight.

Industrial bellwether metal copper was having its best day since July thanks to a two per cent rally, while gold was 0.2 per cent stronger at $US2,517 an ounce, just a touch below its record high of $US2,531.60.

This post was originally published on Michael West.