• The European Central Bank's policy meeting in Frankfurt on Thursday was at the forefront of investors' minds, with policymakers having given advance notice of a first hike in 11 years.
• Price rises continue to overshadow the region. On Wednesday, data out of the U.K. showed inflation hit yet another new 40-year high in June as food and energy prices continued to soar.

LONDON — European stocks closed higher on Thursday after the European Central Bank announced a 50 basis point hike to interest rates, its first interest rate hike for 11 years.

The pan-European Stoxx 600 closed up by 0.3% provisionally, with financial services shares climbing 2.1% to lead the gains while oil and gas stocks shed 2.1%.

The ECB's rate hike brings its deposit rate to 0%, having remained in negative territory since 2014 as the common currency bloc dealt with a sovereign debt crisis and the coronavirus pandemic.

The move is intended to combat rampant inflation across the euro zone, but comes against a backdrop of slowing growth, the war in Ukraine and threats to energy supplies. 

In a press conference following the announcement, ECB President Christine Lagarde said: "Inflation continues to be undesirably high and is expected to remain above our target for some time. The latest data indicate a slowdown in growth, clouding the outlook for the second half of 2022 and beyond."

Hinesh Patel, portfolio manager at Quilter Investors, said the ECB's rate hikes would do little to quell what is predominantly an energy crisis.

"The ECB has waited far too long relative to the Fed and the Bank of England, thereby creating additional pressure on the EUR which is adding to inflationary pressure. The stall in industrial activity indicates that this rate hike is likely to have minimal impact," he said.

"Headline inflation is now creeping into core which will be gravely concerning to the ECB, especially as costs now represent the most pressing problem for corporates in the region – particularly for the likes of Italy."

Italy has been plunged into fresh political uncertainty with Prime Minister Mario Draghi tendering his resignation Thursday after a number of parties in the governing coalition abstained from a vote of confidence that was aimed at renewing and re-uniting the fractious alliance.

Draghi won the vote but many senators refused to take part bringing the national unity government to the brink of collapse. Early elections could now take place in September or October.

Price rises continue to overshadow the region. On Wednesday, data out of the U.K. showed inflation hit yet another new 40-year high in June as food and energy prices continued to soar, escalating the country's historic cost-of-living crisis.

Stateside Thursday, stocks were mixed as traders digested weak corporate results from AT&T, American Airlines and others.

Earnings in Europe on Thursday came from Roche, ABB, Givaudan, SAP, Ocado and AngloAmerican.

In terms of individual share price movement, Swedish media company Viaplay Group climbed 11% after acquiring U.K. sports streamer Premier Sports.

At the bottom of the index, German meal kit subscription firm Hellofresh nosedived 14% after Barclays and Berenberg cut their target price on the stock.

Meanwhile, Swedish cloud communications company Sinch fell 1% after the resignation of CEO Oscar Werner.