European shares close at seven-week high after ECB pause; Lagarde resigns

By Avinash P and Niket Nishant

Oct 29 (Reuters) - European shares closed at their highest since September 8 on Thursday as investors digested strong earnings and the central bank's decision to keep interest rates unchanged.

The pan-European STOXX 600 index ended 0.77% higher at 649.11 points.

Markets also mulled European Central Bank President Christine Lagarde's decision to step down from her role, sparking speculation on her successor.

"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."

The ECB left interest rates unchanged but hinted at a hike in December, warning that high energy costs were fuelling inflation risks.

"We think the Bank will deliver just one more hike, in December. This is in line with our expectation that second round effects will remain largely absent," wrote Andrew Kenningham, chief Europe economist at Capital Economics.

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

EARNINGS BOOST SENTIMENT

Strong corporate earnings have provided a buffer against growing economic uncertainty, supporting European stocks at a time when oil prices remain elevated.

Shell hit a record high after the energy giant reported its highest quarterly profit since 2022 and increased share buybacks.

France's TotalEnergies added 1.2% 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 2.3% after the planemaker kept full-year forecasts and production plans.

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

Banking stocks in Europe were among the laggards, falling 0.2% after a 2.6% decline in Spanish lender BBVA following mixed third-quarter earnings.

Aixtron rose 8.5% after the semiconductor equipment maker posted a jump in third-quarter revenue.

Renault Group jumped about 7% after reporting a stronger-than-expected rise in third-quarter revenue.

(Reporting by Avinash P and Niket Nishant in Bengaluru; Editing by Mrigank Dhaniwala, Leroy Leo, Elaine Hardcastle)