By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- Markets in Spain and Italy outperformed European markets on Thursday as investors took comfort in a speech by European Central Bank President Mario Draghi who supported the view that rates would stay low in the region while the recovery continued to find its footing.

The ECB and the Bank of England both left monetary policies steady as expected, and the Stoxx Europe 600 index rose 0.2% to 330.46, hovering around five-year highs.

Shares of Wm. Morrison Supermarkets topped the decliners list with an 8% drop after the retailer reported a disappointing performance over the Christmas period and said full-year underlying profit would be at the bottom of the range of current market forecasts.

TGS-NOPEC Geophysical Company ASA surged 13% after the Norway-based provider of multi-client geoscience data said net revenues for 2013 will come in higher than expected, at $882 million, due to record-high late sales in the fourth quarter.

Shares of Finnish-based Waertsilae Oyj jumped 10% after the maker of engines for tankers, cruise and navy ships said it's no longer in talks about a potential tie-up with Rolls-Royce Holdings PLC .

Stocks rose after ECB President Mario Draghi said at a press conference that the central bank will be ready to act when it believes the inflation outlook is changing for the worse. Data earlier this week showed annual inflation across the euro zone fall further below the ECB's target in December, while other numbers showed the fastest rise in retail sales in 12 years during November. Watch our Live blog of the ECB press conference

"By and large we don't see a deflation in the Japanese sense of the 90s," said Draghi.

"Draghi has once again strengthened his commitment to keeping interest rates low in a bid to quell growing fears that any rise may derail the euro zone's recovery," said Max Cohen, financial sales trader at SpreadEx in emailed comments. "The decision to hold the main refinancing rate at 0.25 was completely expected, but Draghi did stress that if the medium-term outlook for inflation worsens, the ECB could cut rates further."

Data Thursday showed economic sentiment across the region rising to a more than two-year high in December.

In the U.K., the Bank of England's Monetary Policy Committee also held steady on its bond-buying program and key lending rate.

Peripheral euro-zone markets repeated their outperformance, with the Spain IBEX 35 index up 0.8% to 10,341.80, while the FTSE MIB Italy index jumped 1.3% to 19,6970. Shares of banks were in the driver's seat as the regions hardest-hit by the crisis attracted renewed interest from investors, who were more convinced of the recoveries as borrowing costs have dropped.

The FTSE 100 index was flat at 6,722.52, supported by a 1% rise for BP PLC (BP).

Technology stocks were active after a note from Deutsche Bank. The investment bank downgraded shares of ARM Holdings PLC (ARMHY) to hold from buy, saying it's waiting for better entry points. It also cut Alcatel-Lucent SA (ALU) to hold from buy, with Deutsche Bank analysts saying a deteriorating mix will put incremental pressure on gross margins. Shares of ARM Holdings slid 4.6%, and Alcatel-Lucent dropped close to 5%.

Deutsche Bank reiterated its buy rating on ASML Holding NV (ASMLD) , saying expectations have already moderated for the group. Shares of ASML rose 1.7%.

Among other indexes, the German DAX 30 was flat at 9,502.02, with Daimler AG gaining 0.9%. Shares of Fresenius Medical Care AG & Co. gained 1.8% after it was lifted to neutral from underweight at J.P. Morgan Cazenove. The investment bank raised Fresenius SE to overweight from neutral, and shares rose 1.2%. Analysts said the European medical technology and services sector should face fewer headwinds than in 2013.

The French CAC 40 index eased 0.1% to 4,255.05, with shares of Alcatel-Lucent among those weighing on the downside.

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