By Shubham Batra
(Reuters) -European shares pared some losses on Thursday after the European Central Bank eased the pace of its interest rate hikes and kept its options open on future moves in its fight against stubbornly high inflation.
The pan-European STOXX 600 index was down 0.6%, with media and technology shares leading the declines, falling 3.5% and 1.3%, respectively. The index was down about 0.9% before the decision.
Energy index was up 0.7%, led by a 1.0% jump in Shell Plc after its first-quarter profit dropped slightly from the previous quarter as energy prices cooled, but still beat forecasts.
The ECB raised its interest rates by 25 basis points, the smallest since it started lifting them last summer, bringing the rate it pays on bank deposits, the benchmark for borrowing costs in the 20-country euro zone, to 3.25% from 3.0% earlier.
“Today’s decision was perhaps the most ‘in the balance’ since the current hiking cycle began. We saw some persistence in inflation, as well as recent data showing that rather than easing as anticipated, the labour market appeared to have tightened again,” said Altaf Kassam, EMEA head of investment strategy & research, State Street Global Advisors.
“In the end, lingering concerns on the variable and lagged effects of previous actions, as well as continued issues around the banking sector (although still focused on the US), led to the more dovish 25 bps increase.”
The ECB hike comes after the U.S. Federal Reserve raised its key benchmark rate by 25 bps to the 5.00% to 5.25% range on Wednesday, but dropped from its statement that it “anticipates” further hikes would be needed.
However, Fed Chair Jerome Powell later said it was too soon to say the rate hike cycle is over.
Swedish builder Skanska AB dropped 10% after it reported a sharp fall in operating earnings for the first quarter as soaring inflation and interest rates weighed on real estate markets.
Weighing on the index, Danish drug developer Novo Nordisk A/S fell 2.6% after it said it would reduce the supply of some dose strengths of its popular Wegovy obesity drug in the United States to cope with high demand.
Shares of Airbus SE slid 0.3%, with analysts pointing to persisting supply chain issues and risks to deliveries set for the second half of the year.
Meanwhile, Ferrari NV was among the top gainers, rising 3.5% on first-quarter core earnings beating forecasts, as demand for its cars stretched into the next two years.
(Reporting by Shubham Batra in Bengaluru; Editing by Sriraj Kalluvila)
