Europe stocks close at record high erasing losses from U.S.-China trade war volatility; Bank of England cuts rates

European markets closed at a record high Thursday amid a flurry of earnings releases and a quarter-point rate cut by the Bank of England.

The regional benchmark Stoxx 600 ended the trading day higher by 1.26% as almost all sectors traded in positive territory.

The U.K.’s FTSE 100 rose 1.3%, also hitting a record high. Earlier the British pound tumbled 1% against the U.S. dollar — suggesting traders expect a clear path of rate cuts ahead — despite the central bank stressing it would act “carefully” in its future decisions and raising its inflation forecast.

The fact that all policymakers voted to reduce rates while two of nine voting members unexpectedly favored a bigger half-percent cut was seen as a dovish signal by the market, which has almost fully priced in three more 25-basis-point cuts this year.

“The unanimous decision to loosen policy suggests that concerns among rate setters over the U.K.’s struggling economy are currently outweighing worries over rising inflation, opening the door for another rate cut sooner rather than later,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales. 

The BOE slashed its average annual growth forecast for 2025 to 0.75% from 1.5%.