By Ankika Biswas and Sruthi Shankar
(Reuters) -Europe's benchmark STOXX 600 was unchanged on Thursday as a drag by Germany's Bayer (ETR:BAYGN) and energy stocks offset an earlier rise on hopes of a pause in the Federal Reserve's interest rate hike campaign amid supportive U.S. economic data.
The pan-European STOXX 600 index closed flat, after rising as much as 0.7% earlier in the day.
A slew of recent data sets on inflation and the labour market in the U.S. added to evidence the world's largest economy was losing steam, and raised hopes for a pause in the Fed's rate hikes.
"I don't think the Fed will be hiking again this year," said Patrick Armstrong, chief investment officer at Plurimi Wealth.
"Fed Chair Powell will want to keep rates at these levels until he's gotten inflation down to a level closer to his mandate. But I'm not sure the markets are right about all the rate cuts that are being priced in."
The STOXX 600 has been rangebound in recent weeks, as investors weighed the outlook for U.S. and European monetary policies, as well as potential for a U.S. recession in the wake of aggressive rate hikes and recent banking turmoil.
Euro zone consumers raised their inflation expectations in March, even as the rate of price growth fell and the European Central Bank (ECB) kept raising interest rates, an ECB survey showed.
Governing Council member Joachim Nagel told Bloomberg TV "there's nothing off the table" when asked if interest rates will still be rising in September, while ECB policymaker Pablo Hernandez de Cos noted the rate-raising cycle was at its final stage.
Among major movers, Bayer was the top STOXX 600 laggard, logging its worst one-day fall of 7.5% in almost two years, after warning that 2023 results could come in at the lower end of its target range, hurt by cost inflation and falling prices of glyphosate-based weedkillers.
Energy was among the worst hit sectors, down 1.6%, tracking lower oil prices.
Copper miners Glencore (LON:GLEN) and Rio Tinto (LON:RIO) dropped 4% and 2% respectively on falling prices of the red metal. [MET/L]
BP (LON:BP), Europe's largest bank HSBC (LON:HSBA) and Germany vehicle maker Volkswagen (ETR:VOWG_p) were trading without the entitlement for dividend, losing between 1.2% and 5.6%.
On the flipside, Swedish real estate company SBB was the top STOXX 600 gainer, rebounding 12.7% on Thursday after a three-day slide of nearly 44%.
Norwegian salmon farmer SalMar jumped 6.5% after its first-quarter results.
Meanwhile, UK's FTSE 100 index fell 0.1% after the Bank of England raised its interest rate by 25 basis points to 4.5% and is set to "stay the course" in its battle against stubborn price pressures.