Shares Close Slightly Lower After ECB Holds Rates

European shares were lower at the close of Thursday's choppy session, after the European Central Bank (ECB) announced interest rates would remain on hold.


The FTSEurofirst 300 index provisionally closed down 0.1 percent at 1,099.57 points, after reaching as high as 1,106.70 points prior to the ECB announcement.

The pan-European index kept within the 0.3 percent trading range in which it has been trapped for most of this week, as coordinated stimulus action from global central banks underpinned underlying appetite for equities.

"With equities looking relatively better than bonds and cash in real terms, and in the context of large central bank activism, an underweight in equity is difficult to justify," Stephanie Kretz, a member of the investment strategy team for private banking at Lombard Odier, said.

"However, an overweight is not appropriate either due to the large underlying structural issues and the diminishing marginal effects of quantitative easing over time."

ECB Holds Rates

The ECB kept its main interest rate at 0.75 percent on Thursday, as persistently high inflation offset concerns of the bloc falling back into recession. The rate on its deposit facility remains at 0.0 percent and the rate on the marginal lending facility at 1.5 percent.

Also on Thursday, the Spanish Treasury sold approximately 4 billion euros in bonds at the top end of its target. Yields fell on two of the three different maturities of bonds issued. Confidence is thought to be high as the country may soon seek European aid to cut its debt costs.

The issue was composed of 1.3 billion euros of 2-year bonds, 2 billion euros of 3-year bonds, and 710 million euros of 5-year bonds.

In the U.K., the Bank of Englandvoted to maintain interest rates at a record low of 0.5 percent. The Committee also voted to continue with its program of asset purchases totaling 375 billion pounds, opting against stepping up its program of government bond purchases.

Autos Outperform

In stocks news, the auto sector was the standout gainer across Europe, and closed almost 2 percent higher.

Shares of U.K.-based car and bike maintenance firm Halfords closed over 15 percenthigher after it released a trading statement on Thursday showing strong summer sales.

Shares in the world's largest chemicals maker, BASF , fell 2 percent as the Germany company announced it would have to cut costs and sell a business due to a decline in demand from southern Europe and Britain.

Shares in British industrial chain maker Renold closed more than 23 percent lower after the firm said its full-year adjusted operating profit would be significantly lower as demand falls in European markets.

Shares in Nobel Biocare closed sharply lower on Thursday after it reported poor demand in Japan.