European shares rise; ECB leaves rates unchanged

European shares rose in afternoon trade on Thursday, supported by gains in banks and drugmakers, after the European Central Bank kept interest rates on hold as expected, while investors awaited earnings from U.S. firms.

By 1316 GMT, the pan-European FTSEurofirst 300 rose 0.6 percent at 1,063.33 points, gaining for the second straight session.

Banks were higher, with Barclays, Deutsche Bank, Credit Suisse and BNP Paribas up 0.9 to 2.2 percent.

The ECB kept interest rates unchanged at a record low of 1.0 percent, with attention turned on ECB President Jean-Claude Trichet's news conference at 1330 GMT.

Appetite for risky assets such as equities rose as the VDAX-NEW volatility index shed 7.8 percent to a 19-month low. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher the market's desire to take risk.

The earnings season in the United States is seen as giving direction to equities, and investors will closely watch quarterly figures from chipmaker Intel Corp on Thursday and JPMorgan Chase on Friday.

"At the moment we have a see-sawing market. Investors are looking for indication from Wall Street, and we're waiting (to see) what will come from the U.S. with the Intel results later," said Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank in Bonn.

Pharmaceutical firms were also big gainers. AstraZeneca was up 1.9 percent as the firm gained for a second session on a positive note from Credit Suisse on Wednesday and Deutsche Bank upgrading its target price on Thursday.

Sanofi-Aventis, which also had a price target hike by Deutsche Bank, climbed 1.4 percent. GlaxoSmithKline was up 1.3 percent.

Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 rose 0.4 to 0.6 percent.