Europe close: Stocks mostly flat after ECB and SNB cut interest rates

Most European equity indices finished flat on Thursday with markets rangebound after the European Central Bank moved as expected to lower interest rates.

Indices in London, Paris and Frankfurt closed out the session near to where they started, stocks in Milan and Zurich gained while Madrid's market declined.

The pan-European Stoxx Europe 600 index closed down 0.17% at 519.07, marking only its second decline in 11 days. Despite the fall, the index is still trading close to its record high of 528.08 reached in late-September.

In line with economists' predictions, the European Central Bank cut interest rates on Thursday by 25 basis points to 3% – its fourth cut this year. The ECB also ditched its reference for the need to keep monetary policy "restrictive", suggesting there are more rate cuts on the cards.

Carsten Brzeski, global head of macro at ING, said: "Looking ahead, the risk for the ECB will now be that while it is still highly guided by the past mistake of underestimating inflation and reacting too late, it could now end up overestimating growth and being too late to react again."

Earlier on Thursday, the Swiss National Bank surprised markets with its biggest interest rate cut in nearly a decade. The SNB cut its interest rate from 1% to 0.5% – the lowest level since November 2022. Economists were expecting a 25 basis points rate cut.

Market movers

Shares in Sopra Steria fell by around 10% after the French IT company unveiled financial targets for 2026-2028 at an annual investor day but didn't give guidance on 2025 – which is expected to be a tough year for the industry in France.

Lonza stock rose 5% as the Swiss pharma multinational said it planned to exit the capsules and health ingredients business, as it faced a decline in post-Covid pandemic demand for pharmaceutical supplies that had surged during the crisis.

Pirelli shares gained 2% after a report in the Il Messaggero daily stated that Camfin, the tiremaker's second-largest shareholder, was planning to lift its holding to just under 30%.

Stocks in the recruitment sector were out of favour after a profit warning from UK-listed SThree, which saw shares in the STEM-focused recruiter drop by more than a quarter, causing shares in sector peer Hays and Adecco to also drop.

Swiss banks were falling as investors digested the impact of the SNB's interest-rate cut and what it means for banking income, with Swissquote and Banque Cantonale Vaudoise suffering heavy losses.

Milan-listed automaker Stellantis edged higher, shrugging off reports that it will extend the production stoppage at its Mirafiori plant until 20 January.