The IBEX 35 opened higher on Thursday, encouraged by the banking sector, as the forecast that interest rates will remain higher for longer than expected was consolidated, something that benefits financial institutions despite having a detrimental effect on the economy as a whole.

Other European markets showed losses due to the concern about the distance of interest rate cuts, unlike the Spanish stock market index, where the weight of banks is around a third of the total.

The debt market has received an important blow in the last hours after the publication of a series of better-than-expected economic data -which therefore point to a persistence of inflationary pressures- and a series of poorly received auctions. This nervousness spread to the equity markets, while making safer assets more attractive.

Investors now believe that the Fed will not cut rates before September, in stark contrast to the forecast at the beginning of the year, when there was speculation of a first rate cut as early as March.

Spain's CPI data (which showed inflation rising to 3.8% year-on-year in May) contributed to the monetary pessimism brought by worrying figures from Germany on Thursday, which anticipate a rebound in prices in the monthly report released by the eurozone on Friday.

"(These data are) showing again the difficulty of reaching the 2% inflation target in a sustainable way and limiting the ECB's room for maneuver beyond June, justifying waiting until Q3-4 for the second rate cut (data-dependent), once the first one materializes next week (ECB 6-June)," said analysts at Renta 4.

"Especially considering that the leading cycle indicators continue to point to recovery (Eurozone May confidence today) while the labor market remains strong (Eurozone unemployment rate today)," they added.

On Thursday, the market will be watching for revised GDP figures in the US and economic confidence and unemployment in the Eurozone, in addition to Friday's release of the Personal Consumption Expenditure (PCE) price index, the Fed's preferred inflation measure.

After a cut of 1.16% the day before and a fall of some 200 points in the previous seven sessions, at 07:57 GMT on Thursday, the Spanish selective stock market IBEX 35 was up 95.90 points, or 0.86%, to 11,241.00 points, while the FTSE Eurofirst 300 index of large European stocks was up 0.12%.

The banking sector was up, with Santander up 0.67%, BBVA up 0.74%, Caixabank up 1.17%, Sabadell up 0.66%, Bankinter up 1.49%, and Unicaja Banco up 0.68%.

Among the large non-financial stocks, Telefónica gained 0.96%, Inditex advanced 1.08%, Iberdrola gained 1.01%, Cellnex gained 1.75%, and the oil company Repsol lost 0.93%.

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