Europe close: Stocks gain as ECB stands pat, signals December rate hike

(Sharecast News) - European stocks ended firmly in the black on Thursday after the European Central Bank left rates on hold, as expected, and signalled a 25 basis points hike was likely in December.

The benchmark Stoxx 600 index closed up 0.8% at 649.43, Germany's DAX ended 1.4% higher at 26,052.75 and France's CAC 40 rose 1.1% to 7,970.00.

The ECB, which has lifted rates twice since June, left the deposit rate at 2.50%, while the interest rates on the main refinancing operations and the marginal lending facility were held at 2.65% and 2.90%, respectively.

It said: "Energy prices have continued to rise, posing upside risks to the inflation outlook and downside risks to the growth outlook. While the full effects of the energy shock are still unfolding, underlying inflation has remained broadly stable so far and wages do not show a material response at this stage. The increased magnitude and duration of the energy shock, as well as the implications for indirect and second-round effects, are likely to drive up inflation and lower growth. Financing conditions have tightened since the Governing Council's last meeting, which is likely to weigh on inflation and growth.

"The Governing Council is committed to setting monetary policy to ensure that inflation stabilises at its 2% target in the medium term."

MUFG said: "Lagarde strongly hinted that further tightening is coming barring significant developments between now and the December meeting. We continue to expect 25bp hikes in December and March, taking the deposit rate to 3.00%.

"That would move policy modestly into restrictive territory and, in our view, represents a reasonable response to rising inflation risks."

The interest rate announcement came just hours after the ECB said that president Christine Lagarde plans to step down on 7 February 2027, before the end of her term. Lagarde had been due to step down next October.

Also on Thursday, the European Commission's economic sentiment indicator for the eurozone fell to 96.9 in October from 97.5 the month before, but the employment expectations indicator ticked up slightly.

On the corporate front, Shell jumped as it posted a near-doubling of its third-quarter profit, driven by record refining margins, and announced a $5bn share buyback programme.

Airbus gained as it maintained annual targets despite a decline in third-quarter profits, while Volkswagen rose despite posting a widening of its third-quarter losses as sales in China slumped.

Lloyds Banking Group was weaker despite saying it was on track to meet 2026 guidance as it posted a rise in third-quarter pre-tax profit and net income that met analysts' expectations.

Carlsberg fell as the Danish brewer reaffirmed its full-year profit expectations as third-quarter sales met expectations.

Haleon tumbled as the consumer healthcare firm cut its full-year organic revenue growth guidance, noting that its third-quarter performance was held back by soft cold and flu sales.