The cold water for expectations of rate cuts in the US CPI did not seem to discourage the Spanish IBEX 35 stock index on Thursday, which opted to pin its hopes on cheaper money on this side of the Atlantic.

The session will be marked by the meeting of the European Central Bank (ECB), where no changes in interest rates are expected, so the focus will be on comments on the possible next steps of the entity chaired by Christine Lagarde.

Many economists and market observers believe that the ECB is likely to signal that the first cut in borrowing costs could come as early as June, given the sharp slowdown in inflation and continued economic weakness.

"...we believe Lagarde will reiterate her intention to carry out a first rate cut on 6-June (82% probability), when they will have more data on inflation developments (1Q24 wage data to be released on 23-May). The most relevant thing will be that the market trusts the ECB's ability to decouple from the Fed's decisions," said Renta 4 analysts in their daily report.

Following Wednesday's US CPI shock, which showed a higher-than-expected increase, markets further downgraded the odds of a June rate cut to 18.1% from a pre-indicator level of 56%, according to interest rate futures on LSEG's IRPR tool.

Investors now only expect a total of 41.0 basis points (bps) of cuts this year, or between 1 and 2 25-bp cuts.

In contrast, for the ECB, monetary futures see almost a 72% chance of easing in June, with 3 cuts expected for the year (77 bps).

Elsewhere, the market continued to monitor the situation in the Middle East, amid fears that Israel's war against Gaza could spread to other countries in the region.

Against this backdrop, at 07:05 GMT on Thursday, the selective Spanish stock market index IBEX 35 was down 8.30 points, or 0.08%, to 10,766.70 points, while the FTSE Eurofirst 300 index of large European stocks was down 0.03%.

Among the large stocks, Repsol stood out, with an advance of 1.60% after a quarterly production report with an improvement in the refining margin, which was well received by the market.

In the banking sector, Santander lost 0.16%, BBVA fell 0.82%, Caixabank advanced 0.10%, Sabadell gained 0.23%, Bankinter lost 0.09%, and Unicaja Banco rose 0.26%.

Among the large non-financial stocks, Telefónica gained 0.61%, Inditex dropped 0.16%, Iberdrola gained 0.14%, and Cellnex fell 0.20%.

(Information by Tomás Cobos; edited by Javi West Larrañaga)