European shares close shy of record after ECB delivers first rate-cut in five years

The went ahead with its first cut since 2019, citing progress in tackling even as it acknowledged the fight was far from over.

"Arguably the ECB has been cornered to a rate cut today which reduced somewhat its credibility in relation to 'data dependency'," said Janet Mui, head of market analysis at wealth manager .

"Overall, there are likely to be further in this cycle as disinflation has made huge progress and is set to continue, but the path of the rate cuts is difficult to pinpoint, as is on a better footing again"

In new forecasts, the ECB said it expected inflation to average 2.2% in 2025 - up from a previous estimate of 2.0% and meaning it was now seen holding above the central bank's 2% target well into next year.

ECB President Christine Lagarde said that only one ECB Governing Council member had opposed the bank's decision to cut earlier in the day.

European lenders led sectoral gains, rising 1.7%, while healthcare was another boost, advancing 1.4% as rose almost 4% to hit a record high.

Technology stocks closed 1.2% higher, holding near its highest since December 2000, with German enterprise software giant rising 3.6% after CEO Christian Klein gave encouraging guidance for 2026 and 2027. The stock topped Germany's DAX 40, which closed 0.4% up.

Dutch semiconductor firm also extended its gains from Wednesday, rising 1.5%.

Rate-sensitive sectors like utility and real estate were amongst the laggards, falling 0.9% and 0.6%, respectively.

Among other stocks, Nemetschek advanced 6.2% as the German software developer agreed to buy U.S. software provider GoCanvas.

On the data front, euro zone retail sales fell more than anticipated in April, declining 0.5% against expectations of a 0.3% decline.