FILE PHOTO: A view of the European Central Bank (ECB) headquarters in Frankfurt, Germany, March 6, 2025. REUTERS/Jana Rodenbusch/File Photo

By Sukriti Gupta

(Reuters) -European shares nudged lower on Thursday after the U.S. Federal Reserve delivered a rate cut on expected lines, but tempered hopes for another in December, while investors digested a raft of corporate earnings and awaited the ECB rate decision.

The continent-wide STOXX 600 index fell 0.4% to 573.22 points, as of 0958 GMT.

The Fed cut interest rates on Wednesday but the spotlight was on Chair Jerome Powell, who said a policy divide within the U.S. central bank and a lack of federal government data may put another interest rate cut out of reach this year.

Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said that EU markets, as the rest of the global major indexes, are under the stress of the Fed's decision yesterday, adding that the hawkish stance related to the December rate cut is now "leading to a bearish readjustment of the market expectations and some pull-down in the risk sentiment."

The European Central Bank is all but certain to leave interest rates unchanged for a third meeting in a row later in the day.

Most European sectors fell with banks, media stocks and retail stocks down 0.8%, 1.7%, and 1.1%, respectively.

Meanwhile, three of the biggest U.S. technology companies flagged plans on Wednesday to accelerate capital spending over the next year.

Heavier spending signals from all three companies, combined with concerns of stretched valuations in the U.S. and a hawkish Fed tone weighed on the mood.

"We're in an environment over the last month or so where there have been a lot of questions about the future of AI companies...so probably markets are a little bit more pessimistic," said Anthi Tsouvali, multi asset strategist at UBS Global Wealth Management.

U.S. President Donald Trump said he had struck a deal to trim tariffs on China in exchange for Beijing resuming U.S. soybean purchases, keeping rare earths exports flowing and cracking down on the illicit trade of fentanyl.

Among European earnings, Standard Chartered rose 1.4% after it said it would hit a key profitability target a year earlier than expected.

Airbus rose 1.7% after its third-quarter earnings topped expectations.

ING gained 4.4% after the lender announced plans to allocate 1.6 billion euros ($1.9 billion) on share buybacks and dividends after it beat quarterly profit forecasts.

WPP fell 12.7% after it warned on profit again and its new CEO said it would take time to turn around the company.

Societe Generale fell 3.7% after its CEO Slawomir Krupa declined to commit to handing over more excess capital to shareholders.

On the data front, Germany's gross domestic product stagnated in the third quarter, while France's economy grew 0.5% in the third quarter, exceeding the forecast for the same period.

(Reporting by Sukriti Gupta in Bengaluru; Editing by Sonia Cheema and Vijay Kishore)