European Markets Rally Amid Steady ECB Rates and Positive Earnings

European shares gained on Thursday following the ECB's decision to keep interest rates unchanged. Positive earnings from companies like Volvo Cars and Publicis lifted the STOXX 600 index. However, some companies such as Nokia and Husqvarna faced declines due to underwhelming financial reports.

European shares extended gains on Thursday after the European Central Bank kept interest rates unchanged, as expected, while positive earnings updates from companies across the region boosted the benchmark index.

The continent-wide STOXX 600 rose nearly 0.6% at 1254 GMT, on track to snap three consecutive sessions of losses. The ECB held borrowing costs steady at 3.75% but gave no hints about its next move -- and neither did President Christine Lagarde -- arguing that price pressures remain high and inflation will be above its target well into next year.

'We should be happy it was, in a sense, a boring event,' said Daniel Morris, chief market strategist at BNP Paribas Asset Management. 'The ECB is facing a bigger dilemma than the Fed because the inflation data was surprisingly low out of the U.S., whereas in the Eurozone, you've had much higher inflation data and the recovery hasn't been as strong as expected.'

Bond yields across the board held steady after the decision, with money markets now pricing in a September rate cut by the ECB. While a raft of downbeat earnings and trade concerns have weighed on the benchmark index this week, rate cut expectations have gripped investors' attention.

And, on the day, so did a few upbeat quarterly reports. Volvo Cars accelerated nearly 9%, helping lift auto stocks by about 2%, after the Swedish automotive producer's second-quarter adjusted EBIT beat expectations.

Publicis jumped 5.4% as the French advertising group upgraded its organic growth guidance after beating expectations for the second quarter. Essity advanced 5.7% after the Swedish hygiene products maker reported second-quarter core earnings above expectations.

In non-earnings, Essilorluxottica spiked 6.1% after a news report said Facebook-parent Meta is exploring a stake in the Ray-Ban maker. On the flip side, Finnish telecom equipment maker Nokia shed 4% after reporting a 32% decline in quarterly profit.

Swiss stocks lost 0.3%, led by a 5.4% fall in ABB as the Swiss engineering group's revenue fell short of expectations. Husqvarna slumped 11.3%, the most on the STOXX 600, after the Swedish garden equipment and tools maker said quarterly sales dropped 9% due to cautious consumer spending.

(With inputs from agencies.)