FRANKFURT, May 5 ― European shares rose today, as the European Central Bank's smaller rate hike, and market-beating results from Adidas and Apple boosted sentiment.

The pan-European STOXX 600 index edged up 0.1 per cent, but is on track for its second consecutive weekly loss.

Energy and utilities shares led the gains on the index, rising 1.4 per cent and 1.0 per cent respectively, while food and beverage shares slid 0.4 per cent.

Air France-KLM SA lost 2.8 per cent despite better-than-expected first-quarter revenue and robust cash flow as it benefited from a global recovery in air travel.

The ECB raised its benchmark rates by 25 basis points to 3.25 per cent, the smallest increase in its rate-hike cycle that started last summer, but signalled more tightening was to come.

French ECB policymaker Francois Villeroy de Galhau said earlier in the day that the ECB will continue increasing interest rates until inflation is under control.

“Inflation pressures worldwide help in driving equity markets although we don't like to pay higher prices, as consumers it eats into our pockets. The higher prices go to some company reaping the rewards of those higher prices,” said Chi Chan, Portfolio Manager and Senior Research Analyst, Federated Hermes.

“As long as you're a company that is able to pass through inflation or higher, then you're a beneficiary and we do see that in the latest earnings.”

ECB's Survey of Professional Forecasters showed today that euro zone inflation could be lower in the coming years than previously expected but may stay above ECB's 2 per cent target further out.

Among stocks, the biggest gainer on the index, Adidas AG climbed 7.1 per cent after reporting better-than-expected first-quarter results, with investors hoping the German sportswear giant can turn its fortunes around.

Caixabank SA rose 1.2 per cent after the Spanish lender reported first quarter net profit above expectations and raised its 2023 lending income guidance.

Meanwhile, shares of Evotec SE lost the most on the index, dropping 9.0 per cent after the company announced that it will leave German index MDAX.

In the US, Apple Inc, the world's largest company by market capitalisation, surprised investors with a rise in iPhone sales even as the global smartphone market slumps.

Investors will keep a close eye on the euro zone's retail sales data due at 0900 GMT to assess the economic strength of the region. ― Reuters