Monetary policy meetings are at the forefront: the market widely expects the European Central Bank to keep its key rate at 2%, while a rate cut is anticipated from the Bank of England.
Sergio Ávila, analyst at IG, notes that the ECB "has less room to maneuver on rates than on messaging today. If it maintains a hawkish stance on inflation, the market will interpret this as signaling that rate cuts are a long way off, which typically weighs on European real estate, utilities (gas and electricity retailers), and growth companies, while supporting banks through financial margins."
"If, on the other hand, the ECB acknowledges greater economic weakness and hints that cuts may come sooner, we'd see pressure on banks and some relief for indebted sectors," he explains.
In technology, selling pressure eased somewhat after AI-related jitters rattled Wall Street. Sentiment improved with Micron Technology's forecasts, as the company projected second-quarter profits nearly double expectations, thanks to rising memory prices amid strong demand from data centers.
Also on the day's agenda is the U.S. November inflation report, which will not include the month-on-month rate due to the recent government shutdown that prevented the collection of some October data. According to a Reuters poll, consumer prices likely rose in November at the fastest annual pace in the last 18 months, underscoring affordability issues partly attributed to tariffs.
The Federal Reserve cut its benchmark rate by 25 basis points last week, to a range of 3.50%-3.75%, but indicated it does not foresee further cuts in the short term as it waits for more clarity on employment and inflation.
Meanwhile, U.S. President Donald Trump increased pressure on current Fed Chair Jerome Powell -- who will leave his post in May 2026 -- by stating on Wednesday that the next head of the U.S. central bank will be someone who believes in "much lower" interest rates.
With eight sessions left to close out 2025 -- including Thursday and the half-days on December 24 and 31 -- the Spanish benchmark has gained around 46% this year, though signs of exhaustion are emerging after the recent strong rally.
At 0815 GMT on Thursday, Spain's IBEX 35 was up 30.70 points, or 0.18%, at 16,968.90 points, while the FTSE Eurofirst 300 index of major European stocks edged up 0.05%.
In the banking sector, Santander lost 0.13%, BBVA gained 0.44%, Caixabank was up 0.05%, Sabadell rose 0.09%, Bankinter was unchanged, and Unicaja Banco slipped 0.07%.
Among major non-financial stocks, Telefónica fell 0.74%, Inditex advanced 1.46%, Iberdrola gained 0.14%, Cellnex rose 1.19%, and oil company Repsol was up 0.52%.
(Reporting by Tomss Cobos; editing by Benjamín Mejías Valencia)
