European Shares Rebound Amid Rate Hike and Geopolitical Tensions

European shares closed higher, ending a four-day losing streak, following a 25 basis point interest rate hike by the ECB. While rate-sensitive sectors lagged, gains were led by semiconductor shares on AI boom expectations. Geopolitical tensions influenced market sentiment but optimism prevailed.

After a four-day losing streak, European shares closed higher on Thursday. Investors seemed to overlook escalating rhetoric from U.S. President Donald Trump and focused on the European Central Bank's decision to hike interest rates by 25 basis points.

The ECB's decision marked the first rate increase in nearly three years, accompanied by higher inflation forecasts and a reduced growth outlook amidst ongoing geopolitical tensions in the Middle East. Market analyst Carsten Brzeski noted that the risk of inaction outweighed potential growth impacts from increased rates.

Traders anticipate another rate rise before year-end, affecting rate-sensitive sectors like financial services, which saw declines. Technology stocks displayed mixed performance, with gains led by semiconductor shares on AI boom prospects. The broader STOXX 600 index rose by 0.5%, despite geopolitical worries impacting crude prices.