European stocks buoyed as Bank of England signals it is closer to cutting rates

London’s FTSE 100 hit a new all-time high after the Bank of England revealed it was keeping interest rates at 5.25% for another month.

European stock markets were in good spirits on Thursday (Steven Paston/PA) (PA Archive)

European stock markets were in good spirits on Thursday after the UK’s central bank signalled that it was getting closer to being able to cut interest rates.

London’s FTSE 100 hit a new all-time high after the Bank of England revealed it was keeping interest rates at 5.25% for another month.

The index closed 27.03 points higher, or 0.33%, at 8,381.35, with miners and housing stocks among the biggest risers of the day.

The Bank’s policymakers gave a new sense of optimism by declaring that “things are moving in the right direction”, with inflation set to return to the 2% target between April and June.

The Bank also slightly upgraded its outlook for UK economic growth, and said inflation could fall below target in the next few years.

Investors had been treading water ahead of Thursday's Monetary Policy Committee decision, but as soon as the vote was announced the FTSE 100 surged to a fresh intra-day high

Danni Hewson, AJ Bell

“The Bank of England’s latest Monetary Policy Report gave a much-needed positive boost to the UK’s economic outlook,” said Kathleen Brooks, research director at XTB.

“Growth was revised higher, while inflation was revised lower.

“Although the Bank of England did not confirm that a rate cut would come in June, the governor Andrew Bailey sounded more comfortable with the prospect of rate cuts in the near future.

“It is also worth noting that Bailey did not rule out a rate cut next month, instead saying that it will depend on the economic data.”

AJ Bell’s head of financial analysis Danni Hewson said: “Investors had been treading water ahead of Thursday’s Monetary Policy Committee decision, but as soon as the vote was announced the FTSE 100 surged to a fresh intra-day high.

“And it was a smorgasbord of sectors feeling the warm balm of those tailwinds.”

It was a strong session for other top European stock markets on Thursday. Germany’s Dax was 1.02% higher at the close and France’s Cac 40 closed up 0.69%.

Over in the US, the S&P 500 was up about 0.25% and the Dow Jones was up 0.4% by the time European markets closed.

The pound dropped against the US dollar after the Bank’s interest rate decision was announced, but managed to recover in the afternoon and was up 0.1% at 1.251 dollars.

Sterling was down about 0.1% against the euro at 1.161.

In company news, broadcaster ITV revealed that last year’s US writers’ and actors’ strike helped drive a drop in revenues for the group’s production arm.

Nevertheless, it said advertising revenue had risen in recent months and it is expecting a boost from the upcoming Euros football tournament. ITV’s share price was up 3% at the close.

Meanwhile, shares in BAE Systems edged higher after the defence firm said it had seen a “strong” operational performance and was on track to meet its targets for the year.

The group said it was witnessing high levels of defence spending across its sectors and key markets. Shares in the firm closed 0.8% higher.

The biggest risers on the FTSE 100 were Anglo American, up 82p to 2,736p, JD Sports, up 3.4p to 120.2p, Ocado, up 7.9p to 353.8p, Rightmove, up 12p to 572.8p, and RS Group, up 14.5p to 822.5p.

The biggest fallers on the FTSE 100 were 3i Group, down 154p to 2,820p, HSBC, down 29.9p to 690.9p, Melrose Industries, down 9.8p to 595.6p, Pearson, down 15p to 1,000p, and Intercontinental Hotels Group, down 96p to 7,792p.