European Stocks Close Higher After ECB, BoE Announce Rate Decisions

European stocks closed higher on Thursday with investors digesting the monetary policy announcements from the European Central Bank (ECB) and the Bank of England (BoE), and reacting to the Federal Reserve's interest rate decision, and Fed Chief Jerome Powell's comments.

The pan European Stoxx 600 climbed 1.35%. The U.K.'s FTSE 100 gained 0.76%, Germany's DAX surged 2.16% and France's CAC 40 advanced 1.26%, while Switzerland's SMI edged down 0.11%.

Among other markets in Europe, Belgium, Czech Republic, Finland, Iceland, Ireland, Netherlands, Poland, Portugal, Russia, Spain, Sweden and Turkiye ended with sharp to moderate gains.

Austria and Greece posted modest gains, while Denmark and Norway closed weak.

The BoE raised its benchmark rate by a half percentage point to 4% today, citing stronger-than-expected wage growth but softened its stance on future tightening as inflation is set to return to the target in medium term. The bank rate is now the highest since 2008.

In the monetary policy report, the BoE said inflation is expected to fall quickly this year and the recession would be much shallower than projected in November. However, growth is forecast to remain well below pre-pandemic rates.

Inflation is seen falling to around 4% towards the end of this year and to hit the 2% target sustainably in the medium term.

Inflation has turned the corner, Governor Andrew Bailey said at the press conference.

Gross domestic product is expected to shrink 0.1% in the first quarter of 2023 and to contract 0.5% in the whole year as high energy prices and the path of market interest rates weigh on output.

The ECB raised its key interest rates by 50 basis points, in line with expectations, and signaled that policymakers plan to repeat the move in March, when they will evaluate the future path of policy rates.

Following the latest hike, the main refinancing rate, or refi, is at 3%, the deposit facility rate is at 2.5% and the lending rate is now 3.25%.

Confirming existing market expectations, the bank said policymakers intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March and it will then evaluate the subsequent path of its monetary policy.

In the UK market, Ocado Group soared 11.3% and JD Sports Fashion zoomed 11.15%.

Persimmon, Segro and Scottish Mortgage climbed 8.6%, 8.25% and 7.8%, respectively.

Hargreaves Lansdown, Ashtead Group, BT Group, RS Group, Taylor Wimpey, WPP, St. Jame's Place, Berkeley Group Holdings, Spirax-Sarco Engineering, Unite Group, British Land, Melrose Industries and B&M Value Retail surged 5 to 7%.

Airtel Africa declined 4.4%. Centrica, BAE Systems, BP, Standard Chartered, Rio Tinto, HSBC Holdings, Shell and Reckitt Benckiser lost 1 to 3.2%.

In the German market, Siemens Healthineers, Vonovia, Sartorius, Porsche, Infineon Technologies, Puma, Adidas, Continental and Deutsche Post surged 6 to 9%.

Zalando, Siemens Energy, Volkswagen, Fresenius Medical Care, Mercedes-Benz Group, Brenntag, Symrise, SAP, BMW, Daimler, Fresenius and Covestro gained 2.3 to 5.4%.

In Paris, Dassault Systemes zoomed nearly 13%. Unibail Rodamco rallied 7.8%, while Publicis Groupe, CapGemini and WorldLine gained 6.5 to 7%.

Eurofins Scientific, Teleperformance, Kering, Stellantis, Michelin, Saint Gobain, Alstom, STMicroElectronics and Hermes International advanced 3 to 6%. LVMH, Veolia, Legrand, Essilor, Schneider Electric, Renault, Airbus Group and L'Oreal also ended sharply higher.

Thales, BNP Paribas, Sanofi, TotalEnergies and Engie ended lower by 1 to 3.2%.

In Swiss economic news, consumer sentiment sharply improved in the January quarter to top economists' expectations, driven by significantly less pessimism among households' regarding their own and the national economic situation in the coming months, survey data from the State Secretariat For Economic Affairs, or SECO, showed.

The consumer confidence index climbed to -30 from -47 in the October survey. Economists had expected a score of -38. The latest reading was the strongest since the second quarter survey of 2022, when it was -28.

However, the headline reading remained well below its long-term average of -6 points.

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