European shares rise on defensive boost, set for best week in 2 months

European shares climbed on Friday, underpinned by defensive healthcare and utilities stocks at the end of a week that was dominated by major central bank policy decisions.

The continent-wide European STOXX 600 (.STOXX) index rose 0.4%. The index was on track for weekly gains of 1.4%, its best performance in two months.

The healthcare index (.SXDP) gained nearly 1% and utilities (.SX6P) climbed 0.9% to a seven-week peak, reported Reuters.

The STOXX 600 had ended Thursday lower after the European Central Bank (ECB) raised borrowing costs and signalled more policy tightening in its fight against sticky inflation, a day after the U.S. Federal Reserve's hawkish pause.

In contrast, the Bank of Japan (BoJ) maintained ultra-easy monetary policy on Friday despite stronger-than-expected inflation, signalling it will remain a dovish outlier among global central banks.

Giles Coghlan, chief market analyst at HYCM, said there were more similarities than differences between communiques from the Fed and the ECB, while the BoJ remained a clear outlier and added to hopes for looser global monetary policy.

"The Bank of Japan maintained their ultra-loose policy ... so that's another dovish tick, even though the Fed's report was initially interpreted as hawkish, as the dust settled, traders are focusing more on that data dependency."

The STOXX 600 showed signs of breaking away from a restrictive 1% trading range that was seen for much of the past two weeks, as investors gradually start putting behind major central bank events.

Still, the Bank of England rate decision is due next week and the central bank is likely to raise interest rates by a quarter point to a 15-year high of 4.75%.

Shares of Rheinmetall (RHMG.DE) gained 3.3% after the defence contractor said it expects to strike an ammunition deal worth billions of euros with the German government in the coming weeks.

Stockholm-listed shares of Millicom slid 6% to the bottom of the STOXX 600. The Luxembourg-based telecom group said on Thursday that talks with Apollo Global Management (APO.N) and Claure Group about a potential bid for the company had been terminated.