By Shreyashi Sanyal
(Reuters) -European shares rose on Friday, with banks extending gains a day after the European Central Bank reinforced its fight against inflation with an unprecedented large interest rate hike, while soaring metal prices supported mining stocks.
The pan-European STOXX 600 index was up 0.9% by 0809 GMT, boosted by the banking index, which rose 1.9% to hit a near one-month high.
Miners jumped nearly 3% and were set for weekly gains of more than 4%, as London copper prices were set for their biggest weekly gain in six against a softer dollar. [MET/L]
UK's FTSE 100 index was also boosted by mining stocks, after a few volatile sessions that saw the announcement of the country's new Prime Minister and the death of its longest-reigning monarch. (L)
The ECB delivered a 75-basis-point rate hike on Thursday, in its clearest signal so far that it is not backing down against soaring inflation.
ECB policymaker Peter Kazimir said that inflation in the euro zone is "painfully" high, so the central bank must keep up the pace of rate hikes even after two large, back-to-back increases.
Deutsche Bank (ETR:DBKGn) said it expected the ECB to deliver another supersized interest rate increase in October.
"Unlike the U.S., where inflationary pressures have likely peaked, within the euro-zone, inflationary pressures continue to move higher," said Lawrence Gillum, fixed income strategist at LPL Financial.
Investors are now focussed on a meeting of European Union countries' energy ministers later in the day, where they will figure out solutions from a long list of possible measures to shield citizens from sky-high energy prices as winter approaches.
With Russia turning off its gas taps to Europe indefinitely amid a brewing cost of living and energy crisis in the region, the STOXX 600 has managed to eke out minor gains this week.
"Inflationary pressures will likely worsen in the near term as the Nord Stream pipeline, an important pipeline for natural gas, remains closed for now," Gillum said.
Retail stocks, which took a beating on Thursday, rose 1.8%, while telecoms gained 0.9%.
Telecom Italia (BIT:TLIT) (TIM) shares rose 4.1%, as sources close to the matter said it is close to kicking off a process to sell a minority stake in its enterprise service arm.