Earnings lift European shares ahead of ECB decision, Lagarde resigns

European Shares Rally on Corporate Earnings and ECB Policy as Lagarde Steps Down

Market Reactions and ECB Developments

By Avinash P

Oct 29 (Reuters) - European shares touched over one-month highs on Thursday as a slew of strong earnings reports lifted sentiment ahead of the European Central Bank's policy decision.

Lagarde's Resignation and ECB Policy Outlook

ECB President Christine Lagarde will step down from her role on February 7, the central bank said hours ahead of the policy announcement, ending speculation that she could leave the helm before her term was due to expire in 2027.

The central bank is widely expected to keep interest rates steady at 2.5% when it announces the policy decision at 1315 GMT but the spotlight will be on Lagarde's comments on her own future as well as the euro zone economy.

Market Analyst Insights

"She has been presiding over a euro zone which has been incredibly weak," said David Morrison, senior market analyst at Trade Nation. "It would be very interesting to see who replaces her."

ECB's Rate-Hiking Cycle and Inflation Concerns

The ECB is in the middle of a rate-hiking cycle, seeking to prevent higher energy costs linked to the Iran conflict from spilling over into broader inflation and wage growth.

Euro zone government bond yields have surged in recent weeks, pushing up borrowing costs for households and businesses, particularly for France on concerns about mounting debt and political uncertainty.

Perspectives on Monetary Policy

"We want to find out why they feel okay to pause even though the inflation figures, we see it ticking up again," said Lauren Hyslop, investment manager at Mattioli Woods.

Hyslop said rising bond yields have already tightened financing conditions across the euro zone, potentially reducing the need for further monetary tightening despite inflation remaining above the ECB's target.

Corporate Earnings Drive Market Gains

The pan-European STOXX 600 index rose 0.40% to 646.69 points by 1034 GMT, touching its highest level since early September.

Energy and Industrial Sector Highlights

Shell climbed 3.4% to a record high after the energy giant reported its highest quarterly profit since 2022 and raised share buybacks.

France's TotalEnergies added 1.9% after its third-quarter profits more than doubled to $9.1 billion, supported by reduced global supply of oil products following the US-Israeli war with Iran.

Airbus climbed 2.6% after the planemaker maintained full-year forecasts and production plans.

Contrasts with Global Markets

That contrasted with a gloomy mood in Asian and US markets after earnings from two technology heavyweights, Alphabet and Samsung Electronics, fuelled fresh concerns about the AI trade.

Banking and Other Sector Movements

Banking stocks were the biggest laggards, falling 1.3%, dragged down by a 4.9% decline in Spanish lender BBVA after mixed third-quarter earnings.

Aixtron rose 6.9% after the semiconductor equipment maker posted a third-quarter revenue jump.

Renault Group jumped 6.6% after reporting a stronger-than-expected 1.4% rise in third-quarter revenue.

(Reporting by Avinash P in Bengaluru; Editing by Mrigank Dhaniwala and Leroy Leo)