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European stocks closed broadly higher Thursday after Europe's two most prominent central banks left rates unchanged to fully assess the effect of the recent turmoil in financial markets.
The European Central Bank kept its main interest rate at 4% as expected and ECB President Jean-Claude Trichet gave no indication of an imminent rate hike when speaking at a televised news conference. Trichet failed to mention the key words "strong vigilance" and refused to comment on their absence when questioned.
The Bank of England also held at 5.75% and released a surprise statement about the state of the credit markets.
"It's too soon to tell how the market disruption will impair the availability of credit," the BoE said in the statement, adding that "pay pressures remain muted at the moment."
The London FTSE-100 [FTIND
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], Paris CAC-40 [CAC40-FR
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] and Frankfurt DAX [DAX-XE
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] were largely flat.
U.S. stocks were little changed as data showing the economy was still strong dimmed hopes for a rate cut at the Federal Reserve's meeting on September 18.
Analysts say an ECB rate hike is definitely out of cards for October. "As long as tensions in money markets persist, the ECB will probably play the waiting game," Martin van Vliet, Euro-zone Economist at ING Bank, wrote in a research note.
But he added that lingering inflation risks may still trigger a hike later: "We look for a 25 basis points rate increase around the turn of the year."
The technology, oil and gas, and media sectors were the main gainers in Europe.
Shares in Enel rose 1.16% after the Italian power company beat analysts' expectations with its six-month operating profit as a boost from expanding foreign assets offset higher charges.
Shares of U.K. music retailer HMV gave back early gains to decline by 0.2%. HMV said like-for-like group sales were up 5.8% in the 18 weeks to Sept. 1.
And despite tightening credit conditions, AstraZeneca priced a $6.9 billion bond issue, indicating there is still some appetite from corporate debt. The London-listed drug maker said the funds generated would repay U.S. commercial paper used to buy the biotechnology company Medimmune. Shares fell 0.3%.
On Friday, all eyes are likely to turn to data about the U.S. nonfarm payrolls, which would give clues on the extent of the spillover into the real economy of the subprime mortgages crisis.
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Data is a real-time snapshot *Data is delayed at least 15 minutes