European markets close higher after Bank of England holds rates, Fed cuts

LONDON — European markets closed higher Thursday as investors digested the Bank of England‘s decision to hold interest rates steady, along with the U.S. Federal Reserve‘s 50 basis point rate cut.

The pan-European Stoxx 600 index provisionally ended the session 1.36% higher. All major bourses and most sectors traded in the green, with mining stocks adding 3.16%. Utilities were a rare outlier, down 1.76%.

Bank of England policy makers voted to hold its key rate steady at 5% in a widely anticipated move. The U.K. central bank said a “gradual approach” to monetary easing remained appropriate, with services inflation remaining “elevated.”

Lindsay James, investment strategist at Quilter Investors, said the decision likely paves the way for the Bank to cut rates at its next meeting in November.

“While today may be a pause, the general consensus is to expect more rate cuts this year and into next as the economic momentum that had built up slows and inflation remains close to target,” James said.

“Two more cuts are expected by financial markets, and with time running out in 2024, the next meeting is likely to see the BoE’s next cut delivered,” she added.

The decision came a day after the Fed announced a jumbo 50 basis point cut to interest rates, bringing its target range to 4.75% to 5.00%.

U.S. stocks rallied in morning deals as investors digested the decision.

Trading in Asia-Pacific was choppy Thursday following the Fed cut, but stocks ultimately rose during through the session.

Back in Europe, retail stocks climbed 1.9%. British retailer Next jumped as much as 5.8% during morning trade before pulling back to just above the flatline. The company said it was on track to make almost £1 billion ($1.32 billion) in annual profits following an uptick in first-half sales.

Shares of Commerzbank fell 1% as further developments emerged after UniCredit obtained a 9% stake in the German lender last week. UniCredit CEO Andrea Orcel said the Italian bank was able to buy 4.5% of the state’s stake in Commerzbank because the government trusts it, Reuters reported Thursday citing local media. UniCredit shares were mostly unchanged.

Also on Thursday, Norway’s central bank kept interest rates on hold at a 16-year high of 4.5% and said it plans to start cutting borrowing costs from the start of next year.