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European Stocks Close Higher as Investors Digest Central Bank Decisions

Ting Shen | Xinhua via Getty Images
  • The Bank of England on Thursday hiked interest rates for the first time since the onset of the pandemic, despite concerns over the rapid spread of the omicron variant in the U.K.
  • The European Central Bank further cut its bond purchases on Thursday but vowed to continue its unprecedented monetary policy support for the euro zone economy into 2022.
  • The U.S. Federal Reserve signalled Wednesday that it would be aggressive on tapering bond purchases and sees several rate hikes in 2022.

LONDON — European stocks jumped on Thursday as investors in the region digested monetary policy decisions from several major central banks.

The pan-European Stoxx 600 ended the day up 1.2%, with oil and gas stocks jumping 2.8% to lead gains as all sectors and major bourses traded in positive territory.

Central bank spotlight

The Bank of England on Thursday hiked interest rates for the first time since the onset of the pandemic, despite concerns over the rapid spread of the omicron variant in the U.K.

The Bank increased its main interest rate to 0.25% from its historic low of 0.1% as inflation pressures mount, arguing that the economic data satisfied policymakers' criteria for a hike, while the impact of the variant remains uncertain.

The European Central Bank further cut its bond purchases on Thursday but vowed to continue its unprecedented monetary policy support for the euro zone economy into 2022.

The ECB left its benchmark refinancing rate unchanged at 0%, while the rate on its marginal lending facility remained at 0.25% and the rate on its deposit facility was kept at -0.5%, in line with expectations.

Global investors began the day digesting the Federal Reserve's signal on Wednesday that it would be aggressive on tapering bond purchases and sees several rate hikes in 2022.

The U.S. central bank will begin reducing the pace of its asset purchases in January and buy just $60 billion of bonds each month going forward, compared to $90 billion in the month of December.

Projections released overnight indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and another two in 2024.

The decision to aggressively ease bond purchases follows recent inflation data showing a 6.8% surge in November, which was higher than expected and the fastest rate since 1982.

In terms of individual share price movement, British online retail group THG gained 8.1% to lead the Stoxx 600 while at the bottom of the index, EDF shares plunged 15.5% after faults were found at one of its French nuclear power stations, leading the utility giant to cut its core profit goal for the year.

On Wall Street, U.S. stocks rose slightly as investors assessed the Fed news. In Asia-Pacific, markets closed mostly higher.

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— CNBC's Ryan Browne contributed to this report.

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