Spain's main stock market index closed Thursday at a new seven-month high, boosted by the first drop in US inflation in more than two and a half years, which increased expectations that the Federal Reserve will relax its monetary policy.

The US consumer price index (CPI) fell to 6.5%, in line with market expectations, which have been discounting a progressive easing of inflation since the first days of the year, as a result of lower energy costs and aggressive rate hikes by central banks.

Given the slowdown in CPI, investors are betting on more moderate interest rate hikes by the Fed, which at its next meeting (January 31) could lift its foot off the accelerator with an increase of 25 basis points.

However, some analysts believe that the slight rebound in core inflation (0.3% in its monthly variation compared to 0.2% in November) may encourage the monetary institution to maintain a restrictive tone.

"In a constant fight between the market and the Fed, stock traders will be very sensitive to the comments of any member of the bank waiting for any signal on the evolution of its monetary policy," said Franco Macchiavelli, head of analysis at Admirals Spain.

As a result, the Spanish Ibex-35 closed up 101.80 points on Thursday, or 1.17%, to 8,828.10 points, while the FTSE Eurofirst 300 index of large European stocks rose 0.68%.

The most profitable stocks in the session were those linked to tourism, such as the hotel company Meliá, which gained 4.85%, the airline holding company IAG, which rose 3.68%, and the flight booking group Amadeus, which gained 2.86%, on optimism over the reopening of China.

In the banking sector, Santander rose 2.27%, BBVA gained 0.77%, Caixabank advanced 1.49%, Sabadell gained 1.04%, Bankinter dropped 0.45%, and Unicaja Banco rose 1.26%.

Among the large non-financial stocks, Telefónica gained 1.34%, Inditex advanced 0.95%, Iberdrola gained 0.69%, Cellnex fell 0.85%, and the oil company Repsol rose 0.88%.

(Information by Matteo Allievi; edited by Dario Fernandez)