European shares hold gains after ECB decision

European shares stayed well above 1% on Thursday after the European Central Bank promised continued support to the economy, still choosing to incrementally withdraw stimulus as flagged earlier.

The STOXX euro zone index was up 1.3%, while the pan-European STOXX 600 index rose 1.4%, paring gains slightly after the ECB announcement but continuing to track its best day in over a week, with banks and tech stocks leading gains.

The ECB only slightly reined in stimulus, in an attempt to not choke growth, saying it would wind down its 1.85 trillion euro Pandemic Emergency Purchase Programme by March.

“The ECB announcement showed it’s still far away from tightening policy in any significant way – there was nothing surprising about the decision, and it fell in line with markets had already priced in,” said Craig Erlam, senior market analyst at OANDA.

New data showed euro zone business growth slowed more than expected in December as renewed measures to curb the Omicron coronavirus variant curtailed recovery. [nZRN003KWS ]

The central bank said it will double bond buys to 40 billion euros under the longer-running Asset Purchase Programme in the second quarter before cutting them to 30 billion euros in the third quarter.

“If the economic outlook darkens further due to the new restrictions, we can’t rule out maintaining the double pace of APP purchases for longer,” said Charalambos Pissouros, head of research at JFD Group.

Earlier, the Bank of England became the first major central bank to raise borrowing costs since the pandemic began, hiking rates to 0.25% from 0.1%.

Banks were the top boost on the STOXX 600, with British banks Lloyds (LON:LLOY) and Barclays (LON:BARC) up 5.0% and 4.5%, respectively. HSBC was up 3.6%.

The U.S. Federal Reserve on Wednesday flagged a long-awaited end to its pandemic-era bond purchases in March and signalled as many as three rate hikes in 2022, but delivered an otherwise upbeat economic outlook.

This boosted tech stocks with chipmakers ASML, BE Semiconductor Industries and ams AG between 2% and 5%.

Among individual stocks, Swiss pharma company Novartis AG jumped 5.0% after launching a new share buyback of up to $15 billion to be executed by the end of 2023.

Airbus SE rose 3.6% after Australia’s Qantas Airways Ltd chose the European planemaker as the preferred supplier to replace its domestic fleet, switching from Boeing (NYSE:BA).