European shares climb to near 2-month highs as ECB holds rates

European stocks surged to near two-month highs on Thursday as the European Central Bank maintained interest rates and signaled potential tightening. The STOXX 600 index rose 0.8% to its highest since September 8, marking the best performance in over a month. Most national stock exchanges experienced gains, with Germany's DAX up 1.4% and France's CAC 40 advancing 1.1%.

London's FTSE 100 also saw a slight increase of 0.3%, buoyed by energy stocks. The ECB kept its key rate at 2.50%, opting for a pause after recent rate hikes. In its statement, the central bank noted that energy prices were driving up inflation, posing risks to growth. However, they emphasized that current inflation remains stable and the long-term impact of the energy shock was still unfolding.

The ECB also highlighted that financing conditions had tightened since their last meeting, a reference to the surge in sovereign bond yields. Meanwhile, the U.S. Personal Consumption Expenditures index for September came in as expected, while U.S. GDP growth in the third quarter was 3.4%. These positive U.S. figures helped soothe bond market volatility after the Federal Reserve's meeting, where interest rates remained unchanged at 3.75%-4%.

Despite Alphabet's disappointment over increased AI infrastructure costs, Microsoft surpassed expectations, driven by strong cash flow and cloud adoption. STMicroelectronics fell 2% despite beating profit expectations, while corporate earnings showed mixed results, with energy and consumer discretionary sectors leading the market.

Shell and Adidas both gained as their earnings exceeded forecasts, while Volkswagen declined after reporting a steep drop in operating profit. STMicroelectronics also dropped 2% despite exceeding profit forecasts.