European shares fall ahead of ECB meeting outcome

European shares fell on Thursday as investors digested mixed signals from the U.S. Federal Reserve's interest rate path, while awaiting the European Central Bank's rate decision later in the day.

The pan-European STOXX 600 index slipped 0.4%, with media and automobile shares leading the losses, falling 2.5% and 1.2%, respectively. Energy shares were the sole gainer on the index, led by a 2.0% jump in Shell Plc after its first-quarter profit dropped slightly from the previous quarter as energy prices cooled, but still beat forecasts.

The Fed raised its key benchmark rate by 25 basis points (bps) to the 5.00% to 5.25% range as expected, 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.

All eyes will now be on the ECB's rate decision, due at 1215 GMT, at which the central bank is expected to deliver another quarter percentage point rate hike, but a bigger hike is not ruled out either, as the bloc grapples with sticky inflation. "The ECB is already well behind other central banks in its rate hiking cycle and yesterday EU unemployment fell to a new record low of 6.5%," Michael Hewson, chief market analyst at CMC Markets UK.

"That might prompt a more aggressive posture today and a 50 bps move on the basis that it is better to do too much when it comes to inflation than to do too little." British lender Virgin Money UK Plc was the biggest loser on the index, dropping 7.2% on fall in its half-year profit on higher investment costs and increased provisions for potential bad loans.

Weighing on the index, Danish drug developer Novo Nordisk A/S fell 4.7% 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 1.2% with analysts pointing to persisting supply chain issues and risks from deliveries set for the second half of the year.

Meanwhile, Hargreaves Lansdown Plc climbed 4.1% after it reported a jump in its assets under administration for a three-month period, supported by an increase in its net new business.