European share market: H&M leads Europe's STOXX 600 higher, rate hike jitters weigh

European share market: European shares edged higher on Thursday with Swedish retailer H&M rallying on stronger-than-expected quarterly profit, but economic data from both sides of the Atlantic and hawkish signals from major central bankers weighed on markets.

The pan-European STOXX 600 index (.STOXX) closed 0.1 per cent higher.

Shares of H&M (HMb.ST) climbed 18.2 per cent to their highest in more than a year and topped Stockholm's equity index (.OMXSPI) after the world's second-biggest fashion retailer beat expectations for second-quarter profit.

The move pushed Europe's retail sector (.SXRP) 1.8 per cent higher.

Spain's IBEX index (.IBEX) was up 0.3 per cent, after preliminary data showed that the country's consumer prices rose 1.9 per cent year-on-year in June, their slowest increase since March 2021.

That made Spain the first among the euro zone's large economies to have inflation fall below 2 per cent.

Germany's DAX (.GDAXI) was subdued. Data showed inflation in the euro zone's largest economy rose more than expected in June, interrupting a steady decline since the start of the year in what analysts say was likely a blip.

"The rebound in German inflation ... is almost exclusively due to base effects from last year's temporarily-reduced rail fare," said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics.

Meanwhile, a surprise drop in initial jobless claims and a sharp upward revision in first-quarter GDP underscored U.S. economic resilience and cemented the likelihood that the U.S. Federal Reserve will further raise interest rates this year.

This followed hawkish comments from U.S. and European central bank policymakers at a European Central Bank meet-up in Sintra on Wednesday, where the underlying theme was that rates are likely to stay higher for longer.

"Markets have taken the view that central banks continue to be hawkish and believe they can hike rates as the economy can withstand it," said Daniela Hathorn, senior market analyst at Capital.com.

Adding to recent hawkish messages from central banks globally, Sweden's central bank raised its policy rate by a quarter percentage point as expected and forecast at least one more rate hike this year.

Renault (RENA.PA) advanced 5.0 per cent after the French carmaker raised its full-year financial outlook following the success of its recent launches.

The stock was the top gainer on France's blue-chip index (.FCHI), which rose 0.4 per cent and also helped the automaker sub-index (.SXAP) climb 1.3 per cent.

Engie (ENGIE.PA) rose 4.1 per cent after the French energy company and the Belgian government reached a long-awaited agreement on the extension of Belgium's nuclear reactors Tihange 3 and Doel 4 by 10 years.

British water utility stocks such as Severn Trent (SVT.L) and Pennon (PNN.L) dropped more than 3 per cent each on prospects of tougher regulation and even nationalisation of the country's biggest supplier, Thames Water, as it struggles with huge debt.

Semiconductor firm Aixtron (AIXGn.DE) rose 6.0 per cent after Citigroup initiated coverage on the stock with a "buy" rating.