The flagship CAC 40 index jumped 86.10 points to 7,308.67 points. The day before, it had fallen 0.42%.

The ECB's announcements at the end of its monetary policy meeting were the major event of the session, which investors were particularly eagerly awaited.

The European monetary institution has raised its benchmark interest rate for the tenth time in a row since July 2022, with the ECB signalling that its draconian cycle of monetary tightening could come to an end, but without being able to guarantee that the "peak" of rates was reached.

"The ECB cannot formally say that it has reached a peak, we are still with very high inflation and it wants to keep some room for manoeuvre," said Nadia Gharbi, an economist at Pictet AM.

However, "the main message is that rates will be kept high for a long time, which still indicates that we are reaching the peak of the rate hike," adds the economist.

The cumulative rate hike over the past fourteen months has now reached 4.50 percentage points, an unprecedented shock for the eurozone.

The monetary tightening of recent months has led to a surge in borrowing costs for households and businesses, affecting demand and therefore the distribution of credit.

The ECB on Thursday lowered its growth forecasts in the euro zone until 2025. This is expected to reach only 0.7% in 2023, against 0.9% previously expected, then 1.0% in 2024 and 1.5% in 2025.

The cause? "Germany is in recession, its economy has been contracting for two quarters, and Europe's forward-looking PMIs are deeply in contraction territory," said Ben Laidler, an analyst at eToro.

"That's why this will probably be the last interest rate hike in Europe," the analyst concludes.

On the foreign exchange market, the euro was down against the dollar: it dropped 0.65% to 1.0660 dollar around 16:10 GMT, without however falling beyond its low of late May, when it had reached 1.0635 dollar.

In the bond market, interest rates eased sharply in Europe, rising from 2.65% on Wednesday to 2.59% on Thursday for interest on the 10-year German government bond. The French at the same maturity moved to 3.12%, against 3.19% the day before.

Banks driven by high interest rates

Supported by the prospect of high rates for a long time, banking stocks were sought after on Thursday. BNP Paribas closed up 2.35% to 61.30 euros, Axa 1.98% to 29.15 euros, Crédit Agricole gained 1.46% to 11.71 euros and Société Générale 1.39% to 26.56 euros.

Luxury and real estate driven by China

China's central bank on Thursday cut a benchmark ratio, the third rate cut in a month, in an attempt to revive struggling activity in the world's second-largest economy.

Sensitive to the Chinese market, the world's second largest economy, luxury stocks have climbed in the wake of the decision.

Hermès gained 2.17% to 1,876.00 euros, LVMH climbed 1.78% to 742.60 euros and cosmetics giant L'Oréal 1.13% to 402.00 euros.

The real estate sector, which also benefited from the announcements of the Chinese central bank, advanced. Bouygues gained 2.49% to 32.91 euros and Vinci 2.13% to 106.24 euros.

© 2023 AFP