Published by Global Banking and Finance Review
Posted on December 18, 2025
3 min readLast updated: January 20, 2026
European shares rose after US inflation data and ECB rate decision, boosting investor optimism. STOXX 600 ended up 0.93%, with major indices like DAX and CAC 40 gaining 1% each.
By Ragini Mathur, Purvi Agarwal, Twesha Dikshit and Utkarsh Hathi
Dec 18 (Reuters) - European shares made broad-based gains on Thursday, with lower-than-expected U.S. inflation strengthening hopes for Federal Reserve interest rate cuts in 2026 and the European Central Bank taking a more positive view of the economy after keeping rates on hold.
The pan-European STOXX 600 ended up 0.93% at 585.29, after two straight sessions of declines. Major regional exchanges were broadly higher, with Germany's DAX and France's CAC 40 adding 1% each.
The ECB kept interest rates steady and took a more positive view on a euro zone economy that has shown resilience to global trade shocks, likely cementing investor expectations of no change to interest rates.
The ECB kept its options open, reiterating it would set rates "meeting-by-meeting" based on economic data, following policymaker Isabel Schnabel's hint last week that the next move could be a rate hike.
"The ECB policy statement didn't change very much. They raised economic growth forecasts and they see relatively low inflation, that's basically sort of a rate cut. That's as good a news as you can get from a central bank," said Steve Sosnick, chief strategist at Interactive Brokers.
Across European sectors, banks rose 1.1%, reversing losses earlier in the session. Financial services jumped 2.2%. Heavyweight industrial stocks rose 1.8%.
Retail companies rose 2.1%, with budget fashion group H&M up 3.6%. Consumer goods company Nestle also gained.
Energy companies were up 0.7%, as oil prices rose.
"It's quite surprising that ... despite the trade war, inflation, recession, economic slowdown concerns how good 2025 has been," said Marija Veitmane, head of equity research at State Street.
"Allocation to stocks was close to decade high and we had lots of shocks, but the stock market is even higher right now than it was at the start of the year and investor positions are even higher in terms of allocation to risk."
In London, the FTSE 100 was flat after the Bank of England cut interest rates earlier in the day, but the central bank signalled that the already gradual pace of lowering borrowing costs might slow further.
Equity indexes in Sweden and Norway remained flat after their respective central banks maintained interest rates.
All of the STOXX 600 sub-indexes were positive with aerospace & defence stocks leading gains after coming under pressure this week.
Among other movers, airport operator Aeroports de Paris fell 11.1% to the bottom of the STOXX 600 after the French transport regulator, ART, rejected its 2026 tariff proposal.
Kitchen appliances maker Rational AG rose 5.2%, among the top gainers on STOXX 600, after brokerage UBS upgraded the stock to "buy" from "neutral."
(Reporting by Twesha Dikshit, Utkarsh Hathi Ragini Mathur and Purvi Agarwal in Bengaluru; Editing by Janane Venkatraman, Sahal Muhammed and Jane Merriman)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to keep the economy running smoothly.
A central bank is a financial institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
Monetary policy is the process by which a central bank controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and economic growth.
Economic growth is the increase in the production of goods and services in an economy over a period of time. It is typically measured by the rise in Gross Domestic Product (GDP).
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