4 May - Spain's Ibex-35 stock market index chained a fourth straight session in the red on Thursday as the European Central Bank joined the Fed in raising rates by a quarter of a percentage point, although unlike its U.S. peer it hinted at more hikes ahead as concerns about the banking sector continued.

As expected, the ECB raised its interest rates by 25 basis points, just as the US Federal Reserve did the day before, although it showed a diametrically opposite near future to the former by pointing to more rate hikes ahead.

"Today's decision was perhaps the most 'balanced' since the current hiking cycle began. We have seen some persistence in inflation, as well as recent data showing that, rather than rising as anticipated, labor appears to have shrunk again," said Altaf Kassam, head of investment strategy and research at State Street Global Advisors.

"In the end, lingering concerns about the variable and lagged effects of previous measures, as well as continued problems around the banking sector (albeit still US-centric), led to the more moderate 25 basis point hike," he said of the ECB's smallest rate hike of its current monetary tightening cycle.

Nevertheless, both ECB President Christine Lagarde and Fed Chair Jerome Powell agree that caution is needed, considering that it is too early to call a halt to rate hikes.

Despite this caution, eurozone sovereign yields fell following the ECB's decision, reinforcing expectations that the central bank is close to ending its tightening cycle.

Money market expectations for the ECB's September 2023 deposit facility rate fell to around 3.63%, implying less than two 25 basis point rate hikes before the fall.

With eurozone core inflation falling and regional banks tightening access to credit, most analysts expect the next ECB hikes to be no more than 25 basis points.

"It was to be expected. We see another 25 basis point hike in June. Then, unless May inflation data is stronger than expected, the ECB could send a message like the Fed did yesterday," said Massimiliano Maxia, fixed-income strategist at Allianz Global Investors.

"The Fed's job is done or almost done; the ECB still has some work to do," he added.

Beyond the monetary front, the regained fear of a banking crisis was reinforced on Wednesday after US bank PacWest confirmed that it is in talks with potential partners and investors about strategic options, following a fall in its shares.

As a result, Spain's selective Ibex-35 closed down 33.10 points on Thursday, or 0.36%, to 9,043.60 points, while the FTSE Eurofirst 300 index of large European stocks lost 0.50%.

The banking sector, which has been benefiting from the tightening of credit conditions, was once again in the red due to concerns about the financial sector: Santander lost 2.02%, BBVA fell 1.75%, Caixabank dropped 1.55%, Sabadell fell 2.24%, Bankinter lost 0.67% and Unicaja Banco lost 3.11%.

Among the large non-financial stocks, Telefónica fell 1.62%, Inditex advanced 1.29%, Iberdrola gained 0.98%, Cellnex gained 0.71%, and the oil company Repsol rose 1.56%.

At the bottom of the table, ArcelorMittal fell by 5.29%, while Solaria gained 3.99%. Both companies published results on Thursday.

(Reporting by Dario Fernandez; additional reporting by Shubham Batra, Stefano Rebaudo and Harry Robertson)