Europe close: Stocks jump on central bank pause

European stocks advanced strongly for the fourth straight day on Thursday, on optimism that the Federal Reserve may finally be done with its rate hikes.

"Stock markets have a definite groundhog feel to them today, as once again hopes of a peak in interest rates have seen stocks rally," said Chris Beauchamp, senior market analyst at IG.

"This rally comes almost on cue in seasonality terms, but is doubtless based on expectations that rates will pause here, and in due course come down. Investors have been disappointed before on this front however, so need to resist the temptation to charge back into stocks too quickly.”

The Stoxx 600 index was up 1.58% to 443.47, with gains of nearly 2% for most major indices across Europe.

The pan-European index had risen every day this week after hitting a ten-month low last Friday.

In parallel, the yield on the benchmark 10-year German bund was falling four basis points to 2.72% and euro/dollar was up by 0.48% to 1.0628.

Wall Street stocks advanced on Wednesday evening after the Federal Open Market Committee (FOMC) chose to keep interest rates on hold for the second straight meeting. In a press conference, chair Jerome Powell indicated that the recent run-up in bond yields was keeping financial conditions restrictive for the time being, but said the FOMC would continue to "proceed carefully" and assess economic data as it comes through.

"Powell kept the door open to a rate hike in December, but did not seem very eager," said Philip Marey, analyst at Rabobank.

"We still expect the bond market to do the Fed’s work, making a December hike redundant."

In company news, oil giant Shell gained 4% after it posted third-quarter adjusted earnings of $6.2bn, as it announced a $3.5bn share buyback over the next three months. Earnings were up from $5.1bn in the previous three months, but down from $9.5bn in the same period a year earlier, and only slightly behind expectations of $6.48bn.

Danish pharma group Novo Nordisk saw shares rise 3% after reporting record sales and profits in its third quarter. Sales in particular were up 28% during the three months to 30 September to 9.6bn Danish crowns.

J Sainsbury boosted its full-year outlook after strong grocery sales throughout the first half. The UK supermarket now expects underlying pre-tax profits to come in between £670m and £700m, at the upper end of its previous guidance for between £640m and £700m.

Germany airline Lufthansa jumped 7% after beating expectations with its quarterly earnings due to strong travel demand over the summer and decent bookings ahead of the holiday season.