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ECB maintains rates after seven cuts

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Money markets trim expectations for Sept rate

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Deutsche Bank boosts eurozone banks index

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STMicro falls 16.6% after disappointing earnings report

(Updates with closing levels)

By Twesha Dikshit and Ragini Mathur

July 24 (Reuters) -

European stocks closed higher on Thursday after the European

Central Bank held interest rates steady as expected, while

investors cheered strong earnings from major banks and easing

trade tensions with the United States.

The pan-European STOXX 600 index finished the session

0.2% higher, having earlier touched a six-week high.

Stocks pulled back from their peaks as investors

recalibrated their expectations for future monetary easing after

ECB President Christine Lagarde said policymakers were more keen

on the outlook on trade and its impact on the economy before

deciding on further interest rate cuts.

Interest rate futures markets reflected this shift in

sentiment, with traders

scaling back

bets on a September rate cut. The yield on the 2-year

German bond also spiked, and weighed on equity

markets.

"At 2%, rates remain squarely to the middle of the ECB's

1.5% to 2.5% neutral range. Uncertainty is highly elevated,

however, and, if trade tensions escalate, further easing may

well be required later in the year to help support business and

consumer confidence," said Marchel Alexandrovich, an economist

at Saltmarsh Economics.

The central bank's cautious stance comes as eurozone

inflation has returned to the ECB's 2% target alongside signs of

economic resilience.

Still, sentiment was largely buoyant on expectations of

a U.S.-EU trade deal after the European Commission said that an

agreement was within reach, where tariffs on European exports to

the U.S. would likely settle down at 15% from a harsher 30% levy

planned from August 1.

In a busy day for corporate results, banks were in a

bright spot after second-quarter profit beats from Deutsche

Bank and BNP Paribas.

German lender Deutsche Bank jumped 9.1%, while French bank

BNP Paribas added 0.4% after a near 3% jump earlier in the day.

The eurozone banks index touched its highest since 2008.

Reckitt raised its annual revenue forecast after the

consumer goods company's second-quarter net sales growth topped

expectations, sending shares soaring 10%.

Cooling trade tensions have lifted the STOXX 600 about 18%

from its lows in April after U.S. President Donald Trump slapped

steep tariffs on its trading partners. The index still remains

about 2% away from its March historic high.

Roche gained 1.4% after the Swiss drugmaker reported

better-than-expected first-half operating profit, while Deutsche

Telekom rose 5% after its U.S. subsidiary T-Mobile

posted strong second-quarter results. Both were among

the major boosts to the benchmark STOXX 600.

Meanwhile, Nestle dropped 4.6% after the Swiss

consumer major announced a strategic review of its vitamins

business and posted first-half results.

Chipmaker STMicro slumped 16.6% - its biggest

one-day drop on record - after its first quarterly loss in more

than a decade, in contrast to other tech titans Alphabet

and SK beating earnings expectations.

On the data front, a latest survey showed euro zone business

activity accelerated faster than forecast this month.