FRANKFURT: European shares closed higher on Thursday, snapping a four-day losing streak, as investors looked past escalating rhetoric from US President Donald Trump and weighed the European Central Bank’s decision to raise interest rates.
The ECB raised borrowing costs by an expected 25 basis points, its first hike in nearly three years, while lifting inflation forecasts and cutting its growth outlook amid the price pressures stemming from the ongoing Middle East conflict.
“It’s not a rate hike that will derail the euro zone economy,” said Carsten Brzeski, global head of macro at ING. “The risk of doing nothing and potentially falling behind the curve is larger than the risk of any adverse effects on growth from higher interest rates.”
Traders still expect borrowing costs to rise another 25 basis points before the end of the year, according to LSEG-compiled data.
Rate-sensitive sectors lagged. Financial services slipped 0.7 percent, with asset managers ICG and Partners Group down 4.7 percent and 3 percent, respectively. Real estate stocks also fell 0.8 percent.
The broader pan-European STOXX 600 closed up 0.5 percent at 621.53 points, while major regional bourses also advanced.
The STOXX 600 briefly pared gains after Trump said the US would hit Iran “very hard tonight” and would soon take control of the country’s oil and gas infrastructure and markets.
Crude prices see-sawed throughout the day. They were last up 0.5 percent at USD93.58 a barrel.
Technology stocks were mixed. Semiconductor shares led the gains on the benchmark index, with BE Semiconductor and ASM International rising 6.6 percent and 7.3 percent, respectively, on expectations they will benefit from the AI boom.
Software stocks, however, slipped after Oracle fell sharply following a forecast for higher-than-expected capital spending, pressuring the broader enterprise software sector.
SAP dropped 6.6 percent, Capgemini fell 4.2 percent and Dassault Systemes declined 5.8 percent. UBS also downgraded European IT stocks to “neutral” from “attractive”, citing elevated valuations and renewed focus on AI.