European Stocks Close Broadly Higher After ECB's Massive Rate Hike

(RTTNews) - Despite suffering a setback a little past mid afternoon, European stocks closed higher on Thursday, with investors digesting the European Central Bank's interest rate decision and hawkish remarks by the Federal Reserve Chair Jerome Powell.

The ECB today raised its interest rates by a massive 75 basis points, the biggest hike ever in the single currency bloc's history, and signaled more tightening in the coming months as policymakers try to rein in runaway inflation in a bid to support a slowing economy.

"This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will support a timely return of inflation to our two percent medium-term target," ECB President Christine Lagarde said Thursday.

The ECB assessed that inflation remains far too high and is likely to stay above its 2 percent target for an extended period.

The central bank now expects inflation to average 8.1% this year, 5.5% next year and 2.3% in 2024. The ECB Staff now expects the economy to grow by 3.1% this year, 0.9% next year and 1.9% in 2024.

Meanwhile, Fed Chair Jerome Powell signaled that the central bank will remain aggressive with regard to its monetary policy.

Speaking at the Cato Institute's monetary policy conference, Powell reiterated the Fed's commitment to fighting inflation, once again warning about the dangers of allowing elevated prices to become entrenched.

The pan European Stoxx 600 advanced 0.5%. The U.K.'s FTSE 100 and France's CAC 40 both climbed 0.33%, while Germany's DAX edged down 0.09% and Switzerland's SMI ended 0.14% down.

Among other markets in Europe, Austria, Belgium, Czech Republic, Denmark, Finland, Greece, Iceland, Ireland, Netherlands, Norway, Poland, Portugal, Spain, Sweden and Turkiye all closed higher. Russia ended weak.

In the UK market, Antofagasta climbed more than 4%. Pershing Square Holdings, Standard Chartered, Experian, Ocado Group, Airtel Africa, Prudential, Rentokil Initial, Dechra Pharmaceuticals, Smiths Group, Rio Tinto, Rolls-Royce Holdings and Haleon gained 2 to 3%.

Melrose Industries plummeted more than 9%. The company announced plans to separate its GKN Automotive and GKN Powder Metallurgy divisions and list them as a separate independent business.

Associated British Foods drifted down 7.6% following a profit warning by the company, while B&M European Value Retail, Tesco, Sainsbury (J) and Next lost 3.8 to 5%.

In Paris, AXA, WorldLine and Societe Generale gained 2.6 to 3%. Sodexo, BNP Paribas, Credit Agricole, STMicroElectronics, Teleperformance, Veolia, Publicis Groupe and Pernod Ricard also ended notably higher.

Atos tanked more than 15%. Faurecia ended 4.2% down, while Vivendi and Thales ended lower by about 2.4% and 2.2%, respectively.

In the German market, Deutsche Bank rallied 5.5%. Sartorius, Munich RE, Bayer, Qiagen, Siemens Healthineers, Infineon Technologies and Allianz ended with sharp to moderate gains.

Fresenius Medical Care, Deutsche Wohnen, Vonovia, Continental, Zalando, Fresenius, Volkswagen, Porsche Automobile and BMW ended sharply lower.

In other economic news from the European region, French payroll employment increased less than initially estimated in the second quarter, the latest data from the statistical office INSEE showed.

Payroll employment, which includes the private and public sectors, rose 0.4% quarterly in the June quarter, slightly above the 0.3% increase in the March quarter. The second quarter figure was revised down from a 0.5% rise in the flash report published on August 8.

France's trade deficit more than doubled in July from the last year to EUR 14.53 billion from EUR 13.08 billion, on surging imports of energy, data released by the customs office showed.

Exports logged an annual growth of 20.2% in July, while imports grew more markedly by 32.1%. Month-on-month, exports dropped 2.3%, while imports gained 0.5% in July.

Switzerland's unemployment rate held steady for the second straight month in August, the State Secretariat for Economic Affairs, or SECO, said. The unadjusted unemployment rate came in at 2% in August, the same rate as in the previous two months. That was in line with economists' forecast.