European Markets Close Higher Despite ECB's Rate Decision

European stocks closed higher on Thursday even as the European Central Bank raised interest rates by 50 basis points despite the financial sector shares suffering steep losses in recent sessions following the collapse of Silicon Valley Bank, and the debt crisis in Swiss lender Credit Suisse.

Stocks, particularly from the banking sector, bounced back strongly today, and despite paring some gains midway through the session, mostly ended on the positive side.

The pan European Stoxx 600 climbed 1.19%. The U.K.'s FTSE 100 gained 0.89%, Germany's DAX advanced 1.57% and France's CAC 40 climbed 2.03%, while Switzerland's SMI surged 1.93%.

Among other markets in Europe, Belgium, Czech Republic, Finland, Greece, Ireland, Netherlands, Portugal, Spain, Sweden and Turkiye closed higher.

Denmark and Russia ended weak, while Austria, Iceland, Norway and Poland closed flat.

The ECB hiked interest rates by 50 basis points, in line with its guidance in February, as it expects inflation to remain high for too long. The bank also said policymakers were closely monitoring the financial market turmoil triggered by the banking sector crisis in the US and Switzerland.

The central bank assured that its toolkit is fully equipped to ensure sufficient liquidity support to the euro area financial system when needed.

"The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area," the ECB said, adding, "The euro area banking sector is resilient, with strong capital and liquidity positions."

In her post meeting press conference, ECB President Christine Lagarde said that the banking system is stronger now than it was during the financial crisis of 2008.

In the UK market, Rentokil Initial soared more than 10%. ABRDN surged 5.6%.

Flutter Entertainment, Informa, Schrodders, Lloyds Banking Group, Admiral Group, Convatec Group, Barclays, JD Sports Fashion, Coca-Cola, Croda International, Compass Group, Berkeley Group Holdings, Associated British Foods, Melrose Industries and Persimmon gained 2.5 to 4%.

M&G tumbled 8.4%, and Fresnillo ended lower by nearly 5.5%. Segro, Anglo American Plc, Shell, British Land Co., Endeavour Mining, Vodafone Group and Imperial Brands lost 1 to 3.5%.

In the German market, Siemens Energy, E.ON, Deutsche Boerse, SAP, Symrise, Siemens Healthineers and Covestro gained 3 to 5%.

MTU Aero Engines, Daimler, Puma, Munich RE, Porsche, Siemens, Beiersdorf, Infineon Technologies and HeidelbergCement gained 1.8 to 3%.

Vonovia drifted down 4.65% and Deutsche Bank ended lower by 1.3%.

In Paris, Dassault Systemes, Hermes International, LVMH, L'Oreal, Kering, Schneider Electric and Safran surged 3 to 4.5%.

Airbus, Capgemini, Eurofins Scientific, AXA, Essilor, Saint Gobain, Vinci, Michelin, Air Liquide, Legrand, Publicis Groupe, Renault, ArcelorMittal and Veolia also rallied sharply.

In the Swiss market, Credit Suisse shares zoome 19.1% after the lender secured a lifeline from the Swiss National Bank. The lender said that it would borrow up to $54 billion from SNB to shore up liquidity.

Switzerland's economy is projected to grow significantly below its average this year amid the challenging global environment, the State Secretariat for Economic Affairs (SECO) said in its Spring Forecast.

The expert group of the SECO forecast the alpine economy to grow 1.1% this year. That was marginally bigger than the 1% expansion projected in December.

Although the 1.1% is below average, this will not drive the Swiss economy into a recession. The government assumed that there will be no energy shortages with widespread production outages in the coming winter.

Further, the SECO downgraded the outlook for 2024 to 1.5% from 1.6%.

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