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European Stocks Close Mixed As Rates Are Held Steady

European stock markets closed mixed after the European Central Bank and the Bank of England held interest rates steady.

The FTSE 100 was higher, while the CAC-40 and the DAX were nearly flat. The FTSE Global 300 was also flat.

U.S. stocks traded with small gains as a slightly larger-than-expected rise in jobless claims kept worries about the employment situation at bay, while oil prices receded from record levels.

The ECB kept its main refinancing rate at 4%, with President Jean-Claude Trichet saying the current market turmoil posed some risk to economic growth while inflation pressures remain.

Economists said Trichet kept his options open for the next rate-setting meeting, noting that the word "uncertainty" cropped up several times in his speech.

"They have to wait for economic indicators in euro land to improve," Valentin Hofstatter from Raiffeisen Zentralbank told "European Closing Bell" from Vienna, where the ECB's meeting was held.

But he played down suggestions that the bank's tightening bias might reverse: "they are as far away from a rate cut as they can be."

Calls for Easing in the U.K.

In the U.K. though, where the Bank of England also held rates steady at a six-year high of 5.75%, more and more economists argued it's time for an easing bias.

"Personally, I am disappointed we didn't see a rate cut today," Geoffrey Dicks, chief U.K. economist at RBS, told "European Closing Bell."

He said the high interbank lending rates and scarce credit have already tightened lending conditions and corporate borrowing costs rose by one percentage point in July-August alone.

The banking sector enjoyed another strong day, in the absence of major bad news.

Shares of Northern Rock closed nearly 6% higher after having risen by as much as 14% in morning trade, on speculation of an imminent deal. Citigroup is willing to provide $20 billion in financing to help a takeover of the troubled lender, the Daily Telegraph reported without citing sources.

Looking to individual stocks, Daimler's Mercedes said sales rose 7.4% in September, slightly higher than a 7.1% rise in August. But sales are up less than 1% for year-to-date and sharesof Daimler were flat in a slightly weaker DAX.

Shares of Abbot Group surged 22% after the oil services company said it received proposals that could result in a takeover offer. 3i could be one of the bidders. The Financial Times reported that the private equity group had been given access to Abbot's books.

Trading is expected to be lackluster ahead of a crucial U.S. employment report on Friday, which may indicate whether the Federal Reserve will continue its monetary easing when it meets to set rates at the end of October.

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